Oscillator Classification

  • Absolute Price Oscillator (APO) deals with moving averages of actual prices such as the MACD.
  • Percentage Price Oscillator (PPO) computes the difference between two moving averages on a normalized basis by percentage.  There are several different methods for this including:
    1. Taking calculations on price percentage changes.
    2. Taking the difference between two moving averages and dividing them by the longer moving average value.
    3. Taking the difference between two moving averages and dividing them by the Average True Range (ATR)

All of the PPO methods produce the same signals however they allow you to compare securities of different prices or the same security during different time periods.  Dividing by the ATR is particularly useful when comparing different asset classes or securities of vastly different volatility.

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