Detrended price oscillator

The DPO is calculated by subtracting the simple moving average over an n day period and shifted (n / 2 + 1) days back from the price. To calculate the detrended price oscillator: • Decide on the time frame that you wish to analyze. Set n as half of that cycle period. • • Calculate a simple moving average for n periods. • • Calculate (n / 2 + 1). • • Subtract the moving average, from (n / 2 + 1) periods ago, from the closing price: • \textit{DPO} = \textit{SMA}_{n} \text{ of } ({n \over 2} + 1) \text{ periods ago} ==Interpretation==

As its formula suggests, the detrended price oscillator compares the current price with the average price that was some time ago. When the DPO crosses the zero level, it means that the current price is the same as it was some time ago. Depending on whether the cross is from below or from above, the change of trend can be assessed. A divergence between the price and the DPO can thus be interpreted as the current trend being weaker than the trend of the SMA. ==Usage==

The detrended price oscillator can be used to assess cycles in the asset's price, their typical high and low values, as well as their duration. The DPO can be used on all spot and futures markets, but is not applicable to option price analysis. ==References==