Disparity Index — Indicator dictionary

An indicator that shows, around a baseline of 100, how many percent the close is away from its moving average.

Weapon tier: Standard
Slots used: Sub-charts 1/2

Concept

Disparity Index is “current close ÷ Simple Moving Average of the last 20 candles × 100”. If the close equals the average it is 100; 5% above the average gives 105, and 5% below gives 95.

The panel shows a single line with a dotted line at 100. The farther it is from 100, the farther the price is from its average.

Disparity Index

Charts by TradingView Lightweight Charts™

In this chart, waiting to see the line back above 100 was a calmer ride than buying at the deepest point (where the line was lowest). This chart was chosen as a scene where the price rose after crossing; rising above and then falling back is common too. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.

How it is calculated

Find the Simple Moving Average of the last 20 closes (the same line as the moving average in lesson 3).

Disparity Index = current close ÷ that average × 100. Above 100 the price is above its average; below 100 it is below.

Parameters

What it sets	Name in the game	Default	Range
Candles used for the moving average	period	20	2 – 200

Trading ideas

After a big drop: when the line falls far below 100, the price is seen as “too cheap compared with its average” and a rebound is expected. Rather than buying right away, though, many wait to see the line come back above 100, as in the chart on this page.

After a big rise: when the line rises far above 100, the price is seen as “too expensive compared with its average”, and traders become cautious.

Common traps

There is no fixed value that counts as “far”. A jumpy stock is always far from 100, and a quiet one is always close.
In a strong trend the line stays on one side of 100 for a long time. Trading the other way just because it is far fights the trend.
The chart on this page was chosen as a scene where the price rose after the signal. Read it together with the trend (lesson 2) and volume.

In the game

“Disparity Index” is a “Standard” weapon and uses 1 of the “Sub-charts” panels (limit 2). Volume in the starting setup already uses 1, so adding Disparity Index brings it to 2 (0 left).
The panel shows a single line and a dotted line at 100.

Related indicators and lessons

RSI — An indicator that compares recent up moves with recent down moves and shows, as a number from 0 to 100, which side has been stronger lately.
Stochastic — An indicator that shows, on a scale of 0 to 100, where today’s close sits between the lowest and the highest price of the last few candles.
SONAR — An indicator that draws how much an exponential moving average has risen (or fallen) compared with a few candles ago, to read the “slope” of the trend.
TRIX — An indicator that shows by what percent, per candle, a very smooth line — an exponential moving average stacked three times — rises or falls.
CCI — An indicator that shows how many times its usual swing the price has moved away from its recent average.
ROC — An indicator that connects into a line how many percent the close has risen or fallen compared with the close a few candles ago.
Psychological Line — An indicator that reads the market mood, upbeat or gloomy, from the percentage of recent candles that closed higher.
Williams %R — An indicator that shows, as a number from −100 to 0, how far today’s close sits below the highest price of recent candles.
AB Ratio — An indicator that compares how far each candle rose above and fell below its open, showing which side was stronger during the session.
Ultimate Oscillator — An indicator that blends buying pressure over a short, a medium and a long period into a number from 0 to 100.
3. Moving averages
2. Trends and sideways moves