Detrended Price Oscillator
Type
Momentum oscillator
Short introduction
The Detrended Price Oscillator (DPO) is a technical indicator that attempts to eliminate disruptive trends by using a time-delayed MA. In this way, current oversold and overbought phases can be identified more effectively.
Statement
The DPO attempts to represent market momentum, adjusted for short-term price trends. It calculates a moving average of adjustable length and measures the difference between the current price and the value of the average of half a calculation length in the past. This is intended to measure pure market activity, which is always distributed around an average value.
Formula/calculation
To calculate the Detrended Price Oscillator:
- Specify the time interval n to be analysed.
- Calculate a simple MA for n periods.
DPO = Ct - MA(t - n÷2 + 1)
Interpretation
The indicator provides the same information as a Momentum Oscillator, a common Moving Average Oscillator or a Stochastic Oscillator. Rising values show an increasing dynamic of rising prices. Falling values show an increasing dynamic of falling prices. Crossing above or crossing below the centerline indicates a change in the short-term price trend. The position to the signal line best represents information about up or down dynamics.
Default setting
- Period: 21 periods
Example: Detrended Price Oscillator
