Using the Detrended Price Oscillator to Identify Intermediate Cycles

Summary

The document explains the detrended price oscillator (DPO), an indicator intended to reduce the influence of longer-term price trends so intermediate cycles and potential overbought or oversold conditions are easier to examine. Its calculation subtracts a simple moving average displaced into the past from the price, with the displacement based on the selected lookback period. The accompanying indicator description distinguishes the current DPO value, which can be returned for automated trading, from the shifted line plotted for visual comparison.

An optional signal marks crossings between the current DPO and a past DPO value, filtered by whether the current candle is bullish or bearish. These arrows are presented as signals of interest, not as a tested trading strategy. The document gives a formula and implementation example, but no market, parameter study, backtest, or evidence of predictive performance. Because the DPO deliberately removes emphasis on the latest price action, users should interpret it as a cycle-analysis aid rather than a standalone entry or exit rule.

Key ideas

• The DPO subtracts a displaced moving average from price to emphasize intermediate cycles.
• The displacement is derived from the chosen lookback period and is applied to the moving average comparison.
• The described implementation returns a current DPO value while also plotting a shifted version.
• Optional crossing arrows are filtered by the direction of the current candle.
• The document provides no performance testing, so the indicator signals are not validated trading rules.

Tags

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