Technical indicator

Moving Average Oscillator (Price Oscillator)

The Moving Average Oscillator, also known as the Price Oscillator, shows the difference between a shorter and a longer moving average of the price. It turns a two-average crossover into a single line oscillating around zero.

Type: Trend / momentum
Typical parameters: short n₁ = 10, long n₂ = 20 days
Main signal: Oscillator crosses above zero (buy) or below zero (sell)

Calculation

MAO = {MA}_{n_{1}} - {MA}_{n_{2}}

where n₁ < n₂ are the lengths of the short and long moving averages. A percentage version divides the difference by the long average, which makes values comparable between stocks with different prices:

PPO = 100 \cdot \frac{{MA}_{n_{1}} - {MA}_{n_{2}}}{{MA}_{n_{2}}}

Trading signals

Buy when the oscillator rises above zero – identical to the shorter moving average crossing above the longer one.
Sell when the oscillator falls below zero – the shorter average crossing below the longer one.
The distance from zero shows how strong the trend is; a shrinking histogram warns that the trend is losing momentum before the averages actually cross.

When both averages are exponential with lengths 12 and 26, the Moving Average Oscillator becomes the MACD line.

Technical indicators describe past prices and do not guarantee future results. Combine several indicators and test a strategy on historical data before trading it. See our disclaimer.