Similar to the Trading Equilibrium Gauge, it is important to know how far the current price is from its fair value as calculated using different time frames. This information gives a trader the overview of the recent price behavior as far back as several days. The gauge displays the difference between the current price and the equilibrium prices calculated using 10 different time compressions, which range from five minutes to one day.
The Bar Length illustrates the difference between the current last price level and the corresponding equilibrium price of a given time compression (similar to the Trading Equilibrium Gauge where the difference is measured in standard deviations). The colored horizontal lines on this gauge mark price differences of +1 STD, +2 STD, + 3 STD, + 4 STD and – 1 STD, - 2 STD, - 3 STD and – 4 STD.
This view of the price behavior enables a trader to assess the current price levels through association with the price’s recent equilibrium levels. This creates a sense of the possible price range and its behavior in the future.
Example: If the price is higher by 3 STD than the 60-minute equilibrium level, the trader can assume that there is a chance for the price to retreat towards its equilibrium level. Potential timing of a move back to equilibrium will correspond to the specific time compression being observed.