The Trading Equilibrium Gauge incorporates a unique algorithm designed to determine the fair or equilibrium price of a monitored security. It achieves this by analyzing price fluctuations observed over a 5-minute sliding window.

Key Features:

Fair Value Calculation: The gauge calculates the difference between the current market price and its calculated fair value, based on the assumption that market orders reflect an efficient market. This calculation is expressed in standard deviations, providing traders with insights into market efficiency relative to current price levels.

Price Deviation Levels: Displayed on the left side of the gauge are price levels ranging from the equilibrium level to +4 standard deviations and down to -4 standard deviations. These levels help traders assess price volatility in terms of standard deviations.

Current Price Indicators: In the middle of the gauge, a white arrow indicates the most recent traded price of the security. Its position relative to standard deviations from the equilibrium level helps traders gauge whether the market is overbought or oversold, aiding in decision-making for buying or selling.

BIAS Indicator: Located centrally, the BIAS bar indicates the direction of the equilibrium price trend. A blue bar signifies a bullish trend (price increase compared to the last 5-minute window), while a red bar indicates a bearish trend (price decrease).

Future Price Projection: On the right side, two indicators provide further insights:

A vertical bar changes color from dark blue to bright yellow, indicating the projected rate of change in equilibrium price (BIAS).

A small green marker slides over a vertical price scale, indicating the projected future equilibrium price relative to current levels. A lower position suggests an expected price increase, while a higher position indicates an expected decrease.

Usage Guide:

The gauge serves as a confirmation tool, supporting trading decisions to buy or sell securities:

Decision Support: Use the gauge in conjunction with other indicators, such as the Traders’ Commitment Gauge, to validate trading decisions.

Buy or Sell Signals: For buying decisions, confirm when the gauge aligns with favorable conditions, such as prices nearing lower standard deviation levels and bullish BIAS indications. Conversely, for selling decisions, look for higher standard deviation levels and bearish BIAS indications.

Example Scenarios:

Example 1: Buying Decision

The security price is near -2 standard deviations from its equilibrium level.

It's close to the lowest price registered in the last 5 minutes (cyan dot).

The BIAS bar is blue, indicating a potential price increase.

The green marker on the right indicates a significant lower position relative to the current equilibrium price. All these factors suggest it’s an opportune time to consider buying the security, provided other gauges support this decision.

Example 2: Selling Decision

The security price is near +2 standard deviations from its equilibrium level.

It's close to the highest price registered in the last 5 minutes (yellow dot).

The BIAS bar is red, indicating a potential price decrease.

The green marker on the right is significantly higher than the current equilibrium price level. These factors indicate it’s a suitable moment to consider selling the security, with confirmation from other relevant indicators.