Percentage difference to averages

Simple indicator to analyse the distance of price and average.

An indicator that shows the percentage distance between the current price and a moving average (MA) is a powerful tool to assess how far the price has deviated from its recent average. It provides insights into market extremes, momentum, and potential reversal zones.


Identifying Overbought / Oversold Conditions:

When the price is significantly above the moving average (e.g., +10% or more), it might suggest that the asset is overbought and could be due for a correction or consolidation.
If the price is far below the MA (e.g., –10%), it might indicate oversold conditions and a potential rebound.


Gauging Strength or Weakness:

- A large positive distance shows strong bullish momentum – price is surging away from its average.
- A large negative distance can suggest weakness, panic selling, or capitulation.

This helps traders and analysts see whether current price action is strong or potentially stretched.


Entry/Exit Signal Aid

- Trend followers might enter when the price pulls back toward the MA after a strong run.

- Mean reversion traders use the distance to bet on a return toward the average when the deviation gets too extreme.