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Percentage Price Oscillator (PPO)

The Percentage Price Oscillator (PPO) is a technical momentum indicator that measures the difference between two moving averages as a percentage of the slower moving average.  The Percentage Price Oscillator is very similar to MACD in terms of calculation, display and application.  Whereas the MACD measures an absolute difference, the Percentage Price Oscillator is normalized to produce a relative value.  This makes it possible to compare different securities with the PPO, even with large differences in price.

Percentage Price Oscillator Calculation

The Percentage Price Oscillator is calculated by subtracting the 26-day exponential moving average (EMA) from the twelve-day EMA.  The difference is is turned into a percentage by dividing by the 26-day EMA and multiplying by 100.  The end result is a percentage that tells the trader where the short-term average is relative to the longer-term average.

  1. PPO = ( ( EMA12 {Close} - EMA26 {Close} ) / EMA26 {Close} ) x 100
  2. PPOSL = EMA9 {PPO}
  3. PPOHG = PPO - PPOSL
where:
  • PPO is Percentage Price Oscillator
  • PPOSL is the PPO Signal Line
  • PPOHG is the PPO Histogram
  • EMAxx is the xx-day Exponential Moving Average

Application of the Percentage Price Oscillator

Application of the Percentage Price Oscillator is similar to the MACD.  When the PPO crosses above the signal line the stock price is bullish.  Similarly, when the PPO crosses below the signal line the stock price is bearish.  The PPO histogram can be used to anticipate signal line / PPO crossovers.