Absolute price oscillator

The absolute price oscillator, which we will refer to as APO, is a class of indicators that builds on top of moving averages of prices to capture specific short-term deviations in prices.

The absolute price oscillator is computed by finding the difference between a fast exponential moving average and a slow exponential moving average. Intuitively, it is trying to measure how far the more reactive EMA () is deviating from the more stable EMA (). A large difference is usually interpreted as one of two things: instrument prices are starting to trend or break out, or instrument prices are far away from their equilibrium prices, in other words, overbought or oversold:

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