The Percent Price Oscillator, or PPO, is a great tool for putting a variety of Moving Average information into one place, into data that is easy and straightforward to understand. It takes into account short term averages and long term averages (much like the Moving Average Convergence Divergence) and compares them against zero line crossovers. Try out indicators on Tradingview.com
HOW PPO IS USED
The PPO takes three things into account: the PPO line, the signal line or zero lines, and divergence signals. Each of these requires minimal expertise to calculate or observe. Click this link to access an economic calendar for your trading strategies
- PPO line: This is where we compare short-term (12 day) and long-term (26 day) Exponential Moving Averages. The long-term average is subtracted from the short-term, divided by the long term EMA, and then multiplied by 100. The lengths of these periods can vary, but this is the average. The result is your PPO line, which can then be compared to the signal line.
- Signal line: Different from the PPO line, this an SMA that, with the Percent Price Oscillator, is tracked over nine periods. When the PPO line crosses over the signal line, it may indicate the momentum of a trend. If the PPO trends upward over the signal line, it indicates a price increase.
- Divergence signals: Divergence is, simply, when the price of an investment and the PPO line don’t agree. This can indicate the start of a trend or the start of a reversal.
PPO AND AUTOMATION
A nice feature of the PPO is the scripts that exist as a means to take in all of this information in at a glance. Because PPO lines and their signal crossings can be expressed in a histogram, you don’t need to do the maths every time. This simplifies a large portfolio or, on larger scales, is a stepping stone to an automated system that requires little oversight.
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