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A Detrended Price Oscillator or you can call it DPO in short is a trend indicator that highlights the highs and lows on the price chart using a series of Histogram lines or moving average lines. You can easily find and use this indicator on the Olymp trade chart. In this, article I will share everything about the Detrended Price Oscillator and how you can use them to find high-quality trades.
What is a Detrended Price Oscillator?
Detrended Price Oscillator is a trend indicator that is used to measure the difference between the current price and the historical price of a security. This indicator is designed to remove the trend from the price action and show the short-term price movements that are more relevant to traders.
The indicator is made from the two most important components i.e Moving average line and the zero line. The moving average line helps us to identify the trend of security whereas the zero line helps us identify the strength of the trend.
The DPO is calculated using the following formula:
DPO = Price – SMA(N/2 + 1)
Price = Current Price
SMA = Simple Moving Average
N = Period of the Dominant Cycle
- A Detrended Price Oscillator is a technical analysis tool that helps traders to identify the cycles and trends in the market.
- This indicator calculates the difference between a security price and a moving average price shifted back by a specified number of periods, typically half the length of the analysed cycle.
- This indicator has a moving average line that oscillates above and below the zero line or a midline. When the DPO line intersects above the zero line, it indicates a bullish trend, and similarly, when it intersects below the zero line, it signals a bearish trend.
- DPO indicator alone is a very good indicator and can give you very good signals. However, this indicator becomes even more powerful and can give you better signals if used with the conjunction of other trend indicators like Support and resistance and RSI.
How to use Detrended Price Oscillator on Olymp Trade
Now, once you have signed up. you will land on the Olymp Trade trading dashboard. next, click on the indicator button and search for Detrended Price Oscillator in the list.
Now, click on the settings button, click on the line, and darken the line for better visibility. You can also change the colour of the indicator and period as per your requirements.
How to place trades using Detrended Price Oscillator on Olymp Trade
As I said above, this indicator alone is a very powerful indicator however, you should use this indicator in conjunction with the trend indicator. In this article, I am going to use the combination of a Detrended Price Oscillator and a WMA Indicator. in order to configure the WMA indicator, login to your Olymp trade chart and click on the indicator button => next click on moving average => adjust the time period of the indicator to 14 and 29 =>make sure to adjust the colour of the indicator lines for better visibility.
Place Buy trade with Bullish combination
When the DPO line intersects above the zero line. it signals an upcoming bullish trend. now we need to confirm the trend using the WMA indicator when the short-period WMA indicator line is above the long-period WMA indicator line. It signals a strong Bullish trend and here we can consider placing a buy trade.
Place Sell trade with a Bearish combination
Similarly, When the DPO line intersects below the zero line. It signals an upcoming bearish trend. now we need to confirm the trend using the WMA indicator. when the short period WMA indicator line is below the long-period WMA indicator line. It signals a strong bearish trend and here we can consider placing a sell trade.
A Detrended Price Oscillator or you can call it DPO, in short, is a very popular trading indicator that helps traders to analyse the security over a period of time. DPO is a momentum indicator that is used to measure the difference between the current price and the historical price of a security.
This indicator is made from the two most important components moving average line and the zero line. the moving average line helps us to identify the trend of a security whereas the zero line helps us to verify the strength of the security. this indicator is a very powerful trading indicator and alone can give you very good results however if you want better results with the indicator. you should use the combination of a Detrended Price Oscillator and other trend indicators like RSI or WMA.
So, this is the end of this article I hope you found this article helpful. In case, you still have any issues or doubts you can comment below. I will try to help you as soon as possible. I will highly suggest you try the above trading indicator on the Olymp Trade demo account and shift to Olymp trade real account once you are confident enough.
I wish you the best of luck 😉