Saturday, April 21, 2012

Percentage Price Oscillator (PPO)

Percentage Price Oscillator (PPO)

Percentage Price Oscillator (PPO) is a very close neighbor of MACD indicator.

PPO standard settings are similar to MACD settings: 12, 26, 9, and PPO, same as MACD shows the difference between the two Moving averages, with one difference, that PPO shows it in percents.

Trading with PPO is similar to trading with MACD indicator, with the same zero line crossover rules, divergence etc.

Reasons for using PPO instead of MACD

- by having the percentage measurement rather than price values (for example PPO = 3%), it becomes possible to compare currency pairs with their rising/falling % against each other, regardless the actual prices.

- PPO also offers a better interpretation of the two moving averages in relation to each other. Again, this absolute percentage value allows to make comparisons across time frames, regardless the market price.

Percentage Price Oscillator formula

 PPO = (Shorter-term EMA – Longer-term EMA) / Longer-term EMA

Standard settings for PPO are: 12 period EMA, 26 period EMA, 9 period EMA (same as with MACD) but traders can use any other sets of Moving averages.
PPO signal line = 9 EMA of PPO  

PPO indicatorPPO.mq4


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