Q: Tips

- DPO is best for identifying repeating cycles in price data - The period should match the approximate cycle length you want to detect - Not suitable for trend-following strategies — use for mean-reversion - Compare DPO across different periods to find dominant cycles - Works well on higher timeframes (daily, weekly) for swing trading

Question 1

What is DPO?

Accepted Answer

The Detrended Price Oscillator (DPO) removes the trend from price data to help identify cycles. Unlike most oscillators that use the latest price, DPO is displaced backward to align with the cycle pattern. It oscillates around zero and is useful for identifying cycle highs and lows.

Question 2

How it works

Accepted Answer

DPO subtracts a displaced moving average from the price: ``` DPO = Close[N/2 + 1] - SMA(Close, N) ``` By using a displaced reference, DPO isolates the cyclical component of price movement.

Question 3

Key features

Accepted Answer

- **Above 0** — Price is above the detrended average (cycle upswing) - **Below 0** — Price is below the detrended average (cycle downswing) - **Peaks** — Indicate cycle tops - **Troughs** — Indicate cycle bottoms - **Not a trend indicator** — Specifically designed to remove trend influence

Question 4

Buy signals

Accepted Answer

- DPO crosses above 0 from below (cycle turning up) - DPO reaches a typical cycle low depth (historical comparison) - DPO begins rising from a trough

Question 5

Sell signals

Accepted Answer

- DPO crosses below 0 from above (cycle turning down) - DPO reaches a typical cycle high (historical comparison) - DPO begins falling from a peak

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | SMA period (determines cycle length detected) |

Question 7

Example conditions

Accepted Answer

| Condition | Meaning | |-----------|---------| | `DPO(20) > 0` | Price above detrended average | | `DPO(20) < 0` | Price below detrended average | | `DPO(20) cross_over 0` | Cycle turning upward | | `DPO(20) cross_under 0` | Cycle turning downward |

Question 8

Tips

Accepted Answer

- DPO is best for identifying repeating cycles in price data - The period should match the approximate cycle length you want to detect - Not suitable for trend-following strategies — use for mean-reversion - Compare DPO across different periods to find dominant cycles - Works well on higher timeframes (daily, weekly) for swing trading