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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:

  1. Specify the time interval n to be analysed.
  2. Calculate a simple MA for n periods.

DPO = Ct - MA(t - nĂ·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

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