Detrended Price Oscillator (DPO)

Posted in Finance, Accounting and Economics Terms, Total Reads: 241
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Definition: Detrended Price Oscillator (DPO)

Detrended Price Oscillator is an oscillator used to understand trends in price movements. It strips out price trends and estimates the length of price cycles from trough to trough and peak to peak. Oscillators such as the Stochastic or MACD are momentum indicator but detrended price oscillator is not a momentum indicator. It highlights peaks and troughs in price and further estimates entry and exit points in line with respect to the historical price movements in the cycle.


Calculation: Price that was (A/2 + 1) periods ago minus A period simple moving average

Here A denotes the number of periods. Generally the number lies between 20 to 30.

As the indicator is displaced back in time, cyclic formations are seen. This estimates help to know the entry time and exit time for investment purposes


Advantages:

• Helpful for trade in the market

 

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