The Detrended Price Oscillator (DPO) is a very effective technical analysis tool which is used to provide information about the price of any asset without considering current pricing trends. The main logic behind using this tool is to help investors use detrended prices to understand the selling and buying pressure in a Forex market on short-term price fluctuations in the price of an asset.
The Detrended Price Oscillator can be easily calculated through declaring a time period show a price trending over a 20-day period.In addition they can also take 20 as the period and then divide that by two and add one to arrive at a number n. After that it is important to take moving average of an asset’s price n days before the given time period in question. Finally, it is essential to subtract this from the asset’s ending price for the given period.The result got by above-mentioned calculations is called DPO. Detrended Price Oscillator chart while measuring short term pricing trends. The Detrended Price Oscillator is based on the assumption that long term trends are influenced by short term pricing trends in the given Forex or overall investment market. The severe up and downs in the prices also indicate probable reversals in the total trend of the asset price.