Disparity Index

The disparity index is a technical momentum indicator that measures the relative position of the current closing price of an asset to that asset’s moving average in percentage.

A positive percentage value, which is greater than zero, indicates that the asset’s price is rising, while a negative percentage value, which is less than zero, indicates a selling pressure is increasing and the asset’s price is dropping. A zero value means that the asset’s current price is identically consistent with its moving average.

When the disparity index indicator crosses the zero line, an important early signal of an asset’s increasing momentum is generated because it reflects an imminent rapid change in the trend of a given asset.