Related source: Trading With DPO – Detrended Price Oscillator
Aim of the he Detrended Price Oscillator (DPO) is to identify overbought/oversold zones and cycles, by calculating the difference between a past price and a moving average on the giving time frame. DPO is an effective way for forex traders to create long and short signals. Similar to some other indicators, divergences can be identified with the DPO to assist in identifying potential reversals in trends.
How To Trade With DPO Indicato
When the Detrended Price Oscillator is above the zero line, it basically indicates that the pair is above its moving average, a bullish sign. Similarly, when the Detrended Price Oscillator is below the zero line, it simply shows that the pair is below its moving average, a bearish sign. There are two interpretations of buy and sell signals:
Buy Signal: DPO crosses above zero line.
Sell Signal: DPO crosses below zero line.
Additional Notes: Divergences can be identified with the DPO to assist in identifying potential reversals in trend. You can also draw trendlines and wait for breakouts to go long or short.
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