The DPO binary options’ indicator (detrended price oscillator) differs from the majority of modern indicators in that it has a simpler chart form than the other indicators. In fact, this binary options’ indicator is the price oscillator itself, so it displays changes which occur within the levels of the market trade for the chosen trading tools.
Distinctive features of DPO indicator
The DPO binary options’ indicator is the dentrended one, and it was mentioned above. In order to display the graphical information, it uses the difference between the current price levels for the considered trading tool and the simple moving average based on the latest market trade recorded in the system. The simple moving average displaces on a half of a period, one bar displayed on a chart, or one candle in relation to the current price levels. This approach allows smoothing the short-term oscillation movements in the market and raises the effectiveness of the DPO binary options’ indicator and the information it displays substantially.
The main distinction of the DPO binary options’ indicator from other oscillators consists in the fact that it allows getting more trustworthy information on the short-term price changes in the market for the chosen trading tools. It means that the user of this binary options’ indicator can receive more accurate information on the short-term price oscillations within the current trend.
Setting DPO oscillator
The DPO binary options’ indicator has several modifications and can be used on different platforms, including our binary options’ chart. The binary options’ indicator is displayed in a separate window. This auxiliary tool doesn’t require any special settings that can be used by default. Nevertheless, there are two input parameters that can be changed in order to improve its showings substantially or set your own strategy according to it.
One of these parameters is the MA PERIOD, which allows changing the period of the moving average. This period is 14 by default for this binary options’ indicator. The second parameter, which can be set, is the Bars to count, and it means the amount of bars which will be counted for a chart. The amount of 400 bars is set by default, and if you increase these settings, the chart will look smoother. However, the short-term oscillations on such indicator’s chart can be displayed with the inaccuracy. You can increase accuracy by decreasing the settings. But in this case there is a risk that a trader would neglect to the important events and would not be able to react to the situation swiftly.
Work with DPO indicator
When the oscillator moves down, you can buy the Put option. Therefore, if the indicator reverses up, you can buy the Call options. One of the indicator’s advantages is that it shows the sharp price oscillations. However, given the fact that the indicator’s values are averaged and displayed with a lag, the DPO binary options’ indicator is best to be used as the auxiliary tool for other indicators. For this reason, it is better to make any predictions on price oscillations using other tools. Currently, this indicator is actively used by many traders and appears to be the basis for a number of trading strategies.