What is the APO?
The Absolute Price Oscillator shows the difference between two exponential moving averages of a currency pair’s price, and indicates it as an absolute value.
Features of the APO
The two moving averages have different lengths, one being a ‘fast’ moving average and the other being a ‘slow’ moving average. The APO indicator rates the strength of a trend in relation to the movement between the two EMA’s with short term momentum acting as the catalyst. The most common setups used are usually the 14-day and 30-day EMA’s.
How it Indicates a Signal
The indication of a signal occurs when the signal line crosses above the 0 level which is a bullish indicator, and if the signal crosses below the 0 level that is indicative of a bearish signal. Obscuring of the long term momentum occurs as the short term momentum increases or decreases which leads to the signal being generated. A commonality between most oscillator indicators, a divergence with currency pairs can alert traders to early turnarounds.
How it Differs From Similar Indicators
The APO indicator works similarly to the MACD or the PPO indicator, it only differs from the two as the MACD includes the signal line and the PPO is expressed in percentage terms. With the APO indicator, the higher the value is, the more extreme price movements have been.