Basics of the Detrended Price Oscillator Indicator

By | March 3, 2014

Monday, March 3rd, 2014 by Tim Lanoue

When it comes to trading binary options every bit of knowledge that you have can be the determining factor to whether or not you will succeed as an online trader.  Trading online can be just a hobby for new traders but for many more experienced traders it is their source of income and financial freedom.   For many new traders the thought of becoming a full-time trader at home is very appealing but more often than not their goal is not attained due to the lack of knowledge and experience they have concerning the financial markets.  The purpose of today’s article is because binary option traders with the basics concerning the detrended price oscillator indicator and how to properly apply it into a trading strategy.

For those of you who have never heard of the detrended price oscillator indicator it is a great indicator that has rather unique characteristics.  One of the main functions of the detrended price oscillator indicator is to point out cycles that occur during an assets price action.  A unique characteristic about the DPO indicator is that it is designed to remove any trends associated with the asset making it a trend free type of trading style.

Setting up this indicator is rather simple but is a necessary step needed in order to succeed when using this indicator into a trading strategy.  One of the first things we need to make sure of is that our time frame that we are watching our asset is set no less than 15 minutes and no more than 30 minutes.  Any time frame outside these will effect the accuracy of these signals so we need to make sure to stay in our targeted time frames.  The second thing that we need to make sure of is that our asset we are watching displays a low amount of volatility meaning that it is less likely to change direction in a short amount of time.  Some assets that display this characteristic would be the EUR/USD, USD/CHF, Apple, Exxon, Gold and Silver.

Now that we have the proper setup established the signal process is rather simple and easy to use.  In the picture below you can see an example of how this indicator is used in a trading strategy.  Now remember that this indicators main function is to predict future cycles that will occur in the assets future price levels.  As you can see in the picture below there are three occurrences where the yellow line of our DPO indicator breaks downward in a sharp direction.  As you can see that after each break in our DPO indicator line we have bearish candles that take place, so these breaks are our trading signals.  After there is break in a downward direction in our yellow detrended price oscillator line we place a put trade.  We can wait for a bearish candle confirmation or we can just trade, usually I prefer to wait for a bearish candle to form after the break to serve as a confirmation.

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Using the DPO indicator is a relatively simple indicator to use and can greatly increase your success rate as a trader when traded correctly.  Trading binary options is no easy gig and to make a full-time job out of it is a dream for many new traders that enter the industry.  The detrended price oscillator can be used by itself or it can be combined with other trading indicators making it a useful tool for any online trading strategy.  If you have any questions or comments please feel free to leave them below.  Happy trading and stay tuned for more articles to come!

One thought on “Basics of the Detrended Price Oscillator Indicator

  1. CJ Franklin

    This sounds like a useful trading indicator and one that is worth my time in giving it a try. I will also check out the other trade indicators linked at the bottom of this post. Thanks for providing so many useful resources on your site–I learn something every time I visit.

    Reply

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