The Detrended Price Oscillator, or DPO, removes the influence of the dominant price trend by comparing price to a displaced moving average of a chosen look-back period. The result is an oscillator that tends to move around zero, highlighting cycles rather than the overall trend.
A common approach uses a simple moving average of price over a period n, and subtracts that SMA from the current price, then shifts the result backward by roughly n/2 + 1 periods. The parameter n controls the approximate cycle length you are measuring (typical values range from about 10 to 40). The exact formula may vary by charting tool, but the intent is to strip long-term direction so cyclical fluctuations stand out.
Traders and analysts watch for cyclical turning points reflected by the DPO: crossings of the zero line, and the locations of peaks and troughs relative to price action. Because the indicator is detrended, signals are often interpreted in the context of the current price cycle and in conjunction with other analysis tools, such as certain momentum indicators or price action patterns. It is not a stand-alone signal and signals can be affected by the chosen look-back period and market conditions.
The interpretation depends on the selected period n; different values can produce different signals. In strongly trending markets the DPO may be less informative or produce misleading indications, so practitioners typically use it alongside other indicators.
With a 20-period DPO, the chart shows a trough followed by a rise that crosses above zero, aligning with a short-cycle high in price.
Moving average · Oscillator · Cycle analysis · Price momentum · Relative Strength Index (RSI) · MACD