Web Trader MT5
Disparity Index is a technical indicator that shows the percentage difference between the current price and a selected moving average. It tells you whether an asset is too far above or below its average, and possibly due for adjustment back toward it. A positive reading suggests that the price is trading above the moving average.
If the reading is negative, it has dropped below. The further the reading deviates from zero, the more stretched the price is considered to be. It is used by traders to identify situations where the price has moved too far in one direction and may be subject to mean reversion.
It is best suited for ranging markets and less beneficial in strongly trending conditions, as lengthy readings may persist for extended periods.
Example: A trader notes that the Disparity Index for a commodity is +12 %. This means that the price is 12% above its 20-day moving average. They interpret this as a warning that the rise is overstretched, alongside other indicators of fatigue in the price movement, and start looking for a chance to take profits rather than add to the position.
