The disparity index is a % measurement for the position of the present closing price of an asset as compared to moving averages of other assets. Disparity index was introduced by world renowned author named Steve Nison in his book ”Beyond Candlesticks”.The disparity index has both negative and positive values as price of items included in this index increase or decrease with passage of time. Negative value shows that asset price is decreasing and positive value shows that asset price is increasing. The zero value shows that current price is exactly consistent with its moving average. When disparity index crosses the zero mark then this means that asset is going through rapid change and it is definite tie for selling or buying an asset.
This situation is also an indicator of a overbought or an oversold investment option in the market. Investors must keep an eye on disparity index as oversold or overbought assets can undergo price reversals.