Detrended Price Oscillator

Detrended Price Oscillator (DPO)

The Detrended Price Oscillator (DPO) helps to remove the trend effect and the long-term cycles in price behavior.  It helps to discover the overbought/oversold levels. The DPO is calculated as follows:

DPO = CLOSE - SMA (CLOSE, (N / 2 + 1))

A certain period is taken when calculating the Detrended Price Oscillator. The cycles longer than this period are eliminated from the price dynamics, while the shorter ones remain.

It is recommended to open a buy position when the DPO first falls below the oversold level, and then rises above it, and a sell position in an opposite situation.

Posted Wednesday, November 04, 2009 by Administrator