Web Trader MT5
The DPO, or Detrended Price Oscillator, is a technical indicator that removes the long-term trend from a price series and emphasizes the shorter-term trend. With most price-based indicators, the larger trend is embedded within them, making small cycles within a trend more difficult to identify. What the DPO does is eliminate that noise by subtracting a moving average of the price from a past price, which leaves the cyclical component behind.
The outcome fluctuates around zero: positive when the price climbs above the displaced average price, and negative when it drops below it.
Traders primarily use it to identify the duration of the price cycle, and it is not considered a buy or sell signal. It is designed as a retrospective tool and does not provide direct forecasting of future price direction.
Example: In analyzing the commodity market, a trader wants to know the average duration of the short-term cycle relative to the commodity market’s long-term cycle. They use the DPO and the way the oscillator moves over time to estimate that the trend may reverse roughly every 18 trading days. This information can help them time their entries and exits more accurately in the direction of the trend.
