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Detrended Price Oscillator (DPO) is an indicator for eliminating trends in prices.
DPO allows to more easily identify cycles and, based on that, overbought/oversold levels.
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DPO allows to more easily identify cycles and, based on that, overbought/oversold levels.
Detrended Price Oscillator (DPO) indicator is used to isolate short-term cycles, from long-term cycles.
By eliminating long term trends, DPO helps to focus on shorter price moves/cycles, thus again making it easier to spot an overbought/oversold level.
By eliminating long term trends, DPO helps to focus on shorter price moves/cycles, thus again making it easier to spot an overbought/oversold level.
How DPO indicator does it?
Detrended Price Oscillator compares closing price to a prior moving average, eliminating all cycles that are longer than the moving average.
Detrended Price Oscillator compares closing price to a prior moving average, eliminating all cycles that are longer than the moving average.
Standard DPO indicator setting is 20-period.
The indicator oscillates around zero level, and, if to take 20-day DPO, it'll remove cycles longer than 20 days
How to trade with DPO indicator
DPO trading During Trending Markets
Identify a trend and trade in the direction of the main trend.
Buy when DPO hits zero from above or dips below zero for a while and then goes up above zero.
Sell when DPO hits zero level from below or even crosses above zero for a while and then turns back below zero.
