### What is the Percentage Price Oscillator - PPO

The percentage price oscillator (PPO) is a technical momentum indicator that shows the relationship between two moving averages. To calculate the PPO, subtract the 26-period exponential moving average (EMA) from the 12-period EMA, and then divide this difference by the 26-period EMA. The result is then multiplied by 100. The indicator tells the trader where the short-term average is relative to the longer-term average.

Here is the PPO calculation:

**{(12-day EMA – 26-day EMA) / 26-day EMA} x 100**

### BREAKING DOWN Percentage Price Oscillator - PPO

The PPO and the moving average convergence divergence (MACD) are both momentum indicators that measure the difference between the 26-period and the 12-period exponential moving averages. The main difference between these indicators is that the MACD reports the absolute 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.

### Example of Percentage Price Oscillator

### Comparing Securities

The PPO’s percentage values allow traders to use the indicator to compare different securities easily. This is particularly useful if the securities vary significantly in price. For example, A trader who is comparing Apple, which is trading at $160, and Amazon, which is trading at $1,460, could compare the indicator’s oscillating range for each stock to determine which one is more volatile. For instance, if the PPO’s range for Apple is between -3 and +3, and Amazon’s PPO range is between -2 and +3, it is evident that Apple is more volatile because it has a 6 point range compared to Amazon’s 5 point range. The PPO indicator is also useful for comparing momentum between securities. Traders simply need to look at which stock has the higher PPO value.

### Trading with the Percentage Price Oscillator

The PPO generates trading signals in the same way the MACD does. The indicator generates a buy signal when the PPO line crosses the trigger line from below to above, and a sell signal when PPO line crosses the trigger line from above to below. The trigger line is created by taking a 9-period moving average of the PPO line (see example above.)

Centerline crossovers also generate trading signals. Traders consider a move from below to above the centerline as bullish, and a move from above to below the centerline as bearish. The PPO crosses the centerline when the 12-period and 26-period moving average cross.

Traders can use the PPO to look for technical divergence between the indicator and price. For example, If the price of a security makes a higher high, but the indicator makes a lower high, it may indicate the bullish momentum is subsiding. Conversely, if a security’s price makes a lower low, but the indicator makes a shallower low, it could suggest that the bears are losing their traction. (For further reading, see: How Do I use the Price Percentage Oscillator (PPO) to create a forex trading strategy?)