Disparity Index

AAA

DEFINITION of 'Disparity Index'

A technical indicator that measures the relative position of the most recent closing price to a selected moving average and reports the value as a percentage. A value greater than zero suggests that the asset is gaining upward momentum, while a value less than zero can be interpreted as a sign that selling pressure is increasing.

INVESTOPEDIA EXPLAINS 'Disparity Index'

Extreme values of this indicator can be a very useful tool for contrarian investors to foretell periods of exhaustion. Once the price is excessively pushed in one direction, there are very few investors to take the other side of the transaction when the participants wish to close their position, ultimately leading to a price reversal. Similar to the ROC indicator, important signals are generated when the indicator crosses over the zero line because it is an early signal that momentum is building.

RELATED TERMS
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth ...
  2. Contrarian

    An investment style that goes against prevailing market trends ...
  3. Crossover

    The point on a stock chart when a security and an indicator intersect. ...
  4. Indicator

    Statistics used to measure current conditions as well as to forecast ...
  5. Price Rate Of Change - ROC

    A technical indicator that measures the percentage change between ...
  6. Momentum

    The rate of acceleration of a security's price or volume. The ...
Related Articles
  1. Measure Momentum Change With ROC
    Active Trading

    Measure Momentum Change With ROC

  2. Playing Penny Stock-Like ETFs
    Stock Analysis

    Playing Penny Stock-Like ETFs

  3. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

  4. What You Need To Know About COBRA Health ...
    Insurance

    What You Need To Know About COBRA Health ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center