Description
The Detrended Price Oscillator (DPO) is used to remove trend from price. This is done in order to identify and isolate short-term cycles. The DPO indicator is not typically aligned with the most current prices. It is offset to the left (the past) which helps to remove current trend.
Because it is offset to the past, the DPO is not considered a momentum oscillator. It only measures past prices against a simple moving average as a way to gauge a cycle’s high/low range as well as typical duration, says Bramesh Bhandari, an Indian stock market trader and regular contributor to investment trade publications.
Long-term cycles are made up of a series of short-term cycles. Analysing these shorter-term components of the long-term cycles can be helpful in identifying major turning points in the longer term cycle. The DPO helps investors/traders remove these longer-term cycles from prices.