The Percentage Price Oscillator (PPO) Indicator is a technical analysis tool used to measure the momentum of price movements in the market. In this article, we will discuss the definition, working, and best settings of the PPO Indicator for MT5, and how to use it to trade in the forex market.
The Percentage Price Oscillator (PPO) Indicator is a momentum indicator that was developed by Gerald Appel. It is used to measure the difference between two moving averages of price, as a percentage of the larger moving average. The PPO Indicator is similar to the MACD Indicator, but uses a percentage difference instead of a dollar difference.
Working of PPO Indicator in MT5
The PPO Indicator for MT5 works by calculating the percentage difference between two moving averages of price. The indicator is based on the premise that momentum precedes price, and that price movements are driven by buying and selling pressure in the market.
The calculation of the PPO Indicator is based on the following formula:
PPO = ((12-day EMA of price) – (26-day EMA of price)) / (26-day EMA of price) * 100
- PPO is the value of the PPO Indicator
- Price is the closing price of the security
- 12-day EMA is the twelve-day exponential moving average
- 26-day EMA is the twenty-six-day exponential moving average
When the PPO Indicator is rising, it indicates that buying pressure is increasing in the market, and that prices may soon rise. Conversely, when the indicator is falling, it indicates that selling pressure is increasing, and that prices may soon fall.
Best Settings for PPO Indicator
The best settings for the PPO Indicator depend on the trading strategy and the time frame being used. Generally, traders use a shorter time frame, such as 5 minutes or 15 minutes, for intraday trading, while a longer time frame, such as 1 hour or 4 hours, is used for swing trading.
Traders can also adjust the period used in the calculation of the PPO Indicator. The default setting is 12 and 26 periods, but traders can adjust this to suit their trading style and strategy.
How to Trade with PPO Indicator?
Identifying Potential Trend Reversals
Traders can use the PPO Indicator to identify potential trend reversals in the market. When the indicator diverges from the price action, it may signal that a trend reversal is imminent. For example, if prices are rising, but the PPO Indicator is falling, it may signal that a trend reversal is likely.
Confirming Trading Signals
Traders can also use the PPO Indicator as a confirmation tool in their trading. When the indicator confirms a trading signal, traders can have more confidence in their trading decision. For example, if prices are rising, and the PPO Indicator is also rising, it may confirm a bullish trading signal.
Features of PPO Indicator
The PPO Indicator has several features that make it a useful tool for traders. Some of these features include:
- Real-time data on momentum in the market
- Can be used to identify potential trend reversals and to confirm trading signals
- Can be used in combination with other technical analysis tools
The PPO Indicator for MT5 is a useful tool for traders looking to measure the momentum of price movements in the market. By using this indicator in combination with other technical analysis tools, traders can identify potential trend reversals and confirm trading signals. The PPO Indicator is easy to use and can be adjusted to suit different trading styles and time frames. Download the PPO Indicator for MT5 for free today and start using it in your trading strategy.