What is Detrended Price Oscillator, DPO?
The Simple Moving Average, SMA
The SMA is a Moving Average of no weight. The data collection is of equivalent value per day and is weighted in equal proportion. The oldest data point is removed when Every new day begins, and the newest is added to the list.
Calculation of Detrended Price Oscillator, DPO
The DPO is ascertained by deducting the simple moving average over a span of “n” day and shifting n/2+1 days from the size. To measure the detrended oscillator price: Choose the time frame you would like to evaluate. Set “n” to half the cycle time. Calculate quick n-period moving average.
Compute (n/2+1) Subtract the moving average from the trading price (n/2+1) days ago:
DPO = Near – Easy moving average [from (n/2+1) days ago]
What Timeframe to use the Directional Movement Index?
Detrended Price Oscillator (DPO) Signals
Signal for Buying
- Once Detrended Price Oscillator crosses over the zero lines above.
2. Once the detrended price oscillator is in a proven oversold region, as evidenced by the oscillator’s previous lows, and the detrended price oscillator and price equally break the downhill pattern of resistance.
Signal for Selling
- As detrended price oscillator intersects below zero.
- If Detrended Price Oscillator is in a reported overbought region, as evidenced by the oscillator’s previous peaks, and the Detrended Price Oscillator and price both breach the trendline of upward support.
Interpretation of Detrended Price Oscillator, DPO
Trading Strategy of Detrended Price Oscillator, DPO
Relationship Between Detrended Price Oscillator and Volume
They can help you identify price trends that correlate with the DPO signal. This is possible since volume indicators show the degree of market activity. The technique is to position high or decreased volumes of DPO-based trades. It also helps to stop market oscillator signals during small trade volumes.
Detrended Price Oscillator Trading in Trending Markets
Identify a movement against the dominant market, and exchange. Buy from above when the DPO reaches zero or fell below zero for a moment, and then go above zero. If the DPO reaches zero amounts at the edge or even passes zero for some time then sell it and then go back to normal.
Detrended Price Oscillator Trading in Ranging Markets
Identify individual levels of over boot and over-sold for each currency pair based on previous price behavior. After coming down from an over-sold location, buy the DPO and then exit and close it from the oversold zone. The Oscillator enters an overbought zone after Detrended Price, and then exits it and closes under the overbought zone.
The Price Oscillator uses two moveable averages, one shorter and one longer then calculates the difference between the two moving averages.