Detrended Price Oscillator (DPO)

Strips out the longer-term trend so shorter price cycles are easier to see.

What it is

The Detrended Price Oscillator (DPO) is a study that removes the broader trend from price so that shorter-term cycles and peaks/troughs become easier to see. Unlike most oscillators, it is not designed to track momentum or follow the current trend. Instead, it compares price to a moving average taken from earlier in the look-back window, which has the effect of "flattening out" the dominant trend. The result oscillates around a zero line and is plotted in a separate pane. It is purely an educational charting tool: it describes how price behaved relative to a trend-removed average, and it predicts nothing. As with any indicator, it is not buy/sell advice and trading carries risk of loss.

How it works

DPO uses a single length input, n. It first computes a simple moving average of price over n periods. The classic ("centered") formula compares the close from (n / 2) + 1 bars ago to the current n-period SMA: DPO = Close[(n / 2) + 1 bars ago] − SMA(Close, n). Equivalently, on the chart this average is shifted back in time so it sits in the middle of the look-back window rather than at the latest bar. Because of this displacement, the standard DPO deliberately ignores the most recent price action and "looks back" instead of tracking the live bar — its most recent plotted point is offset, and the last (n / 2) + 1 bars are typically not shown. The output swings above and below zero: above zero means price was higher than the trend-removed average at that point, below zero means it was lower. The larger the length, the longer the cycle it tries to isolate.

How traders read it

• Traders often read the zero line as a reference: values above zero mean price was above its detrended average for that period, values below mean it was below — descriptive, not a buy or sell instruction.
• Some use DPO to estimate the rough length of recurring price cycles by measuring the spacing between successive peaks or troughs — a historical observation only.
• Some watch how far DPO swings from zero to gauge how stretched price was relative to its detrended average, while remembering it is backward-looking.
• Because the standard DPO is shifted back in time, its most recent plotted point is not the current bar and does not reflect live price.
• DPO is typically used alongside other tools and context, never alone, and none of its readings are predictive. Nothing here is advice, and trading carries risk of loss.

Common settings

A single length input, commonly 20 or 21 bars, is typical; some traders set it to roughly half the cycle they want to isolate. It is plotted in a separate pane with a zero line. The classic "centered" version displaces the plot back by (length / 2) + 1 bars; a non-centered variant plots at the current bar. Note that integer division means odd and even lengths can round the displacement differently.

Strengths

• Makes shorter-term price cycles and swing highs/lows easier to spot by removing the dominant trend.
• Simple to compute and read, with a single length input and a clear zero reference.
• Useful as an educational lens for studying how price behaved relative to a smoothed, trend-removed baseline.

Pitfalls to watch

• DPO is not a momentum or trend-following indicator — reading it like RSI or MACD misrepresents what it measures.
• The classic version is displaced backward by (n / 2) + 1 bars, so it lags by design and is not a real-time signal; some platforms also offer a non-displaced variant, which changes interpretation.
• Cycle length found in past data can shift or disappear, so any cycle estimate is a historical observation, not a forecast.
• Results depend heavily on the chosen length; different lengths can show different 'cycles,' which makes it easy to curve-fit a reading you wanted to see.
• Like all indicators, DPO can be ambiguous in choppy or non-cyclical markets, guarantees nothing, and is not advice — trading always involves risk of loss.

Pine v6 example

//@version=6
indicator("Detrended Price Oscillator (DPO)", shorttitle="DPO", overlay=false)

length = input.int(21, "Length", minval=2)
isCentered = input.bool(true, "Centered (displaced)")

ma = ta.sma(close, length)
barsBack = length / 2 + 1  // integer division

// Centered (classic) DPO shifts the plot back in time, so it is not real-time.
// Non-centered compares the current close to a displaced average at the latest bar.
dpo = isCentered ? close[barsBack] - ma : close - ma[barsBack]
plotOffset = isCentered ? -barsBack : 0

plot(dpo, "DPO", color=color.blue, offset=plotOffset)
hline(0, "Zero", color=color.gray, linestyle=hline.style_dashed)

Pro tip: If you want to study a specific cycle, set the length to roughly half its suspected period — but always treat any cycle you find as a past observation, not a prediction, and confirm whether your platform's DPO is displaced so you don't mistake an offset reading for current price. None of this is advice, and trading carries risk of loss.

Educational only — not financial advice, not a recommendation to trade. No indicator is predictive; trading involves substantial risk of loss.