A Smoothed, Standardized Price Oscillator for Reversal and Trend Signals

Summary

The Smooth Price Oscillator (SPO) compares two recursively smoothed price series: a slower line and a faster line. Their difference forms the oscillator. The described ProRealTime implementation scales that difference using the largest recent standard deviation, then applies a Hull average to the normalized series. It also plots bands based on a long rolling mean and standard deviation, alongside fixed positive and negative thresholds.

The proposed reversal signals occur when the oscillator reaches beyond a threshold and turns back: a rising turn below the negative threshold or a falling turn above the positive threshold. The text also suggests using persistent extreme readings as trend context and checking other indicators for confirmation. Example settings are provided in the source, but no backtest, instrument-specific evaluation, or evidence of predictive performance is included. The article cautions that smoothing may delay responses in volatile markets and that parameters need adjustment to market context; its settings should therefore be treated as starting points rather than validated defaults.

Key ideas

• The SPO subtracts a slower smoothed price line from a faster one to form an oscillator.
• It standardizes the oscillator using recent standard deviation and smooths the result further.
• The implementation plots statistical bands and fixed thresholds around the normalized oscillator.
• Proposed reversal signals mark a turn beyond either threshold, while persistent extremes may provide trend context.
• The document reports no performance testing and warns that smoothing can delay signals in volatile markets.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.