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# Percentage Price Oscillator

The % Price Oscillator (PPO) shows the difference between two exponential moving averages (one shorter period and one longer period) expressed as a percentage of the longer of the two moving averages. It should be noted that the Price Oscillator uses a simple moving average, unlike the Percentage Price Oscillator.

A PPO reading of for example +5% means the shorter moving average is 5% higher than the longer moving average.

The oscillator performs well in a trending market with strong directional moves, but can give unreliable signals when the market is trading in a sideways range.

The indicator fluctuates around zero, with increasing values indicating the price is rising and decreasing values indicating the price is falling. PPO rising above zero indicates the market is in an upward trend, as the short term moving average has risen above the longer term moving average and is interpreted as a buy signal. Conversely, PPO falling below zero indicates the market is in a downward trend, as the shorter term moving average has fallen below the longer term moving average, is interpreted as a sell signal.

Another method used is to look for divergences between price movement and the indicator. For example, where price makes a new high but the PPO fails to do similar, this indicates momentum may be decreasing and recent prices increases are not sustainable, signalling a sell opportunity. On the other hand, where a market’s price makes new lows but the PPO fails to do similar, this implies momentum is increasing and that the down trend may be coming to an end.

If the Percentage Price Oscillator is over sold or overbought, then a change of direction can signal a change of trend. The Percentage Price Oscillator is commonly used with a signal line which is based on the Exponential Moving Average of the Percentage Price Oscillator. The Percentage Price Oscillator Group indicator has the same characteristics as the MACD indicator. Like the MACD the signal line lags the price action and is best used to identify the change of a trend after a strong directional move.

## Percentage Price Oscillator Formula

The formula used to calculate the Percentage Price Oscillator indicator is:

$\displaystyle \text{Percentage Price Oscillator} = \displaystyle \left ( \frac { \text{Short Exponential Moving Average } sp - \text{Long Exponential Moving Average } lp } { \text{Long Exponential Moving Average } lp } \right ) * 100$

Where $\displaystyle sp$ period defaults to 12 and the $\displaystyle lp$ period defaults to 26. When a signal line is used as part of the Percentage Price Oscillator Group, the default smoothing period is 9.

## Percentage Price Oscillator Indicator

The Percentage Price Oscillator indicator can be displayed on the TimeToTrade charts. To add the Percentage Price Oscillator indicator to the TimeToTrade charts, go to the chart settings and click on the 'Add Indicator' button. Click on the search box and type the name of the indicator that you are looking for, or for example type Percentage Price Oscillator and scroll through the results:

After adding the Percentage Price Oscillator indicator, within the chart settings, click on it to set the parameters and change colours.

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