DPOMASimple (DetrendPrice Oscillator) is an indicator that removes the price trend, in order to observe the cyclical movements of the price without the noise of the trend, the DPOMASimple indicator can be used to determine support and resistance levels in the peaks and valleys or as trading signal whe cross 0 level.
- DPOMASimple > 0 -> Buy.
- DPOMASimple < 0 -> Sell.
- Markets in range: Maximum and minimum will be the same as in the past. Set the overbought and oversold levels based on the observation of the past and then use them as trading signals, I mean sell when goes out of an overbought / buy zone when goes out of oversold
- Trending markets: in a Bull Market there will be normal, but minimal peaks just below the zero line or greater than zero. Only operate in the direction of the trend and buy when the index crosses again above the zero line or forms a 'V'. the other way around for a bear market.
With the help of a SMA, DPOSimple is able to become a complete Trading system.