Percentage Price Oscillator - PPO
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Definition of 'Percentage Price Oscillator - PPO'
A technical momentum indicator showing the relationship between two moving averages. To calculate the PPO, subtract the 26-day exponential moving average (EMA) from the nine-day EMA, and then divide this difference by the 26-day EMA. The end result is a percentage that tells the trader where the short-term average is relative to the longer-term average.
Calculated as:
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Investopedia explains 'Percentage Price Oscillator - PPO'
The PPO and the moving average convergence divergence (MACD) are both momentum indicators that measure the difference between the 26-day and the nine-day exponential moving averages. The main difference between these indicators is that the MACD reports the simple difference between the exponential moving averages, whereas the PPO expresses this difference as a percentage. This allows a trader to use the PPO indicator to compare stocks with different prices more easily. For example, regardless of the stock's price, a PPO result of 10 means the short-term average is 10% above the long-term average.
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Find out how this indicator may help improve the average investor's entry and exit points.
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Momentum can be used with other tools to be an effective buy/sell indicator.
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Learn to trade in the direction of short-term momentum.
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