Detrended Price Oscillator: stripping the trend to find the cycle

What it measures

The DPO subtracts a moving average from price, but the average is taken from a point in the past rather than from the current bar. That displacement is what removes the trend instead of merely lagging it.

What is left is the cyclical component: how price oscillates around its own trend, with the trend itself taken out.

It is a cycle-measuring tool, not a momentum one, and using it as a momentum oscillator misses its entire purpose.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute a simple moving average over the period.

2. 2

   Shift that average backward by half the period plus one bar.

3. 3

   Subtract the shifted average from the current price.

4. 4

   Plot the result around a zero line.

Settings

The period should be set to roughly the cycle you are trying to isolate. Twenty is a common default and is arbitrary; measuring the actual peak spacing and setting the period from that is the intended workflow.

How to read it

• Peaks and troughs mark where price sat furthest from its own trend, and the spacing between them is the dominant cycle length.
• Once you know the cycle length, you know roughly how long a typical swing lasts — which is a scheduling fact, not a signal.
• Zero crossings are not entries. The line crosses zero every cycle by construction.
• The amplitude tells you how far price typically travels from trend, which is useful for setting expectations on a swing.
• The practical payoff is planning rather than entry. If the DPO shows a twenty-bar dominant cycle, you know roughly how long to give a swing before concluding it has failed, and roughly how far from trend to expect price to travel — both of which are decisions people usually make by feel.

Where it misleads

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