Price Oscillator Indicator (PPO) Formula, Strategy, Settings

Price Oscillator Indicator pic

The Price Oscillator Indicator is a technical analysis tool, which is used for measuring momentum that is very similar to the MACD or moving average convergence divergence. The price oscillator indicator is also known as the percentage price oscillator. This Percentage Price Oscillator (PPO) is a momentum oscillator that measures the difference between two moving averages as a percentage of the larger moving average. In the signals of PPO indicator are generated with signal line crossovers, centerline crossovers, and divergences. Because these signals are no different than those associated with MACD. This article will focus on a few differences between the two. They are – (a) the readings of PPO are not subject to the price level of the security and (b) the readings of PPO for different securities can be compared, even when there are large differences in the price.

To attach the Percentage Price Oscillator (PPO) indicator, traders can find under the STUDIES section in the Zerodha Kite browser app and it is also available in the Kite mobile App. The Field is close or you can also choose from OHLC. We can also set the field Short Cycle at 12 and we can these value high or low. The Moving Average Type is simple/exponential etc and we also change this. Please check the image below to understand how we attached the PPO indicator in HDFC Bank share price chart. You can attach the PPO indicator on to any charts likes daily, weekly, monthly or intraday.

The PPO line in Kite is a single line, that is different from MACD indicator. MACD has 2 lines, MACD and Signal. However the slopes and divergences and also the zero line crossover can be used for trend identification.

Percentage Price Oscillator (PPO)

Calculation of Price Oscillator Indicator:

PPO Line: {(12–day EMA – 26–day EMA)/26–day EMA} x 100

PPO Line is taking as a result of long-term EMA and subtracting it from a shorter term EMA. Then the result is divided by the longer term EMA and then multiplied by 100. The used values are 26 days EMA (for the longer term EMA) and 12 days EMA (for the shorter term EMA) of this PPO line which is trader can choose this value.

Signal Line: 9–day EMA of PPO

The Signal Line is 9 is the most common which is trader can choose what period length EMA to use.

PPO Histogram: PPO – Signal Line

This PPO Histogram is the main difference between the PPO Line and Signal Line will continually differ. The difference between the two lines oscillator around a zero line.

Price Oscillator Indicator

Conclusion :

The Price Oscillator Indicator or PPO generates the same signals of the MACD. It also provides an added dimension as a percentage version of MACD. The PPO levels of the Nifty 50 (price ~10700) can be compared against the PPO levels of Sun Pharma (price ~490) because of the PPO “levels” the trading field. Also, PPO levels in one security can be compared over extended periods of time, even if the price has doubled or tripled. This is not the case for the MACD. The advantages of this Percentage Price Oscillator (PPO) is this technical indicator is still not the best oscillator to identify overbought or oversold conditions because movements are unlimited.


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Author: Ankita Chakraborty

Ankita has done her Diploma Engineering in Computer Science & Technology. She is pursuing her degree in Engineering and also well experienced in the equity market and real estate related content writing. She is the one who has developed the technical indicators section of our site.

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