Measures how far the close sits from a moving average as a percentage. It reads an overstretched price like a rubber band, catching the moment a price far from its average gets pulled back to the mean. A staple oscillator in Japan.
The Disparity Index is an oscillator that expresses how far the close sits from a moving average, as a percentage.
Where many oscillators track the rise and fall of the close itself, the Disparity Index reads the distance between price and the moving average.
When price is above the moving average the value is positive, when below it is negative. It swings around 0, and the wider the swing, the farther price has drifted from its average.
It helps to picture an invisible rubber band stretched between price and the moving average. When price extends far above the average, the band stretches and a pull back toward it builds. The Disparity Index puts a number on that stretched distance.
A large positive value means price has stretched too far up (overbought), a large negative value means it has drifted too far down (oversold), and both tend to get pulled back toward the average.
It is especially widely used in Japan, where the 25-day disparity index is the well-known standard.
How to Read
TVC:NI225
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