In a simple word, the Disparity Index (DI) indicator will tell you, the percentage of changing share prices respect of Moving averages.
Example: if 14 periods moving average is 100. And the current closing price is 110. So the current price is 10% above respected to 14 periods moving average.
This indicator by default Period is 14. So if you use 14 Period simple Moving average line. Then the SMA line will match with this indicator. When share price crossing moving average line, this indicator will Cross 0 line. And price increasing or decreasing percentage will show in this indicator line. (This is for testing purpose to understand this indicator).
in Short, this indicator will tell you, share price Trading how much percentage (%) above the specific moving average Line.
Disparity Index indicator setting
- Field: by default value is the closing price. Means closing price will take to calculate this indicator
- Period: 14-period value means, 14 share price candle.
- Moving average Type: it’s the simple moving average. By default values. Other Moving averages are also available. (Simple, Exponential, Time series, etc, etc)
- Result: this is the line color of the DI indicator.
What does Disparity Index Indicator tell you?
- This indicator tells you, share price trading How much percentage above from the specific moving average line.
- When you use a moving average line. Moving the average line only shows you, what is the moving average price and what is the current price. But using this indicator will show how much percent above from the current price.
Disparity Index indicator trading strategy
- When this indicator crossing 0 level and rising upward direction you can buy.
- When this indicator line crossing 0 level and moving in a downward direction, you can sell.
- This indicator is moving average which will show the percentage of share price trading above or below from the moving average line. So for short term trading, you can use less period Moving average. And long term trading you can use more period average from the settings.
- 0 line is the support or resistance zone. When share price trading above 0 line, then 0 line is the support zone. And when share price trading below 0 line , then 0 line work as a Resistance move. After breaking, support Zone share price can fall more. Similarly, after breaking Resistance zone share price can rise more.
Conclusion
Disparity Index indicator tells you, how much percent above or below share price trading from the specific moving average.
*Read Related Post for more information.