Introduction to the Percent Difference Oscillator Indicator
The Percent Difference Oscillator (PDO) indicator is, as the name suggests, an oscillator that shows the difference between the moving average and the current close price. Results are provided as the percent of the moving average (above or below the MA).
The formula for the Percent Difference Oscillator indicator is the following:
PDO = 100*(Close – MA)/MA
When the olive line of the PDO breaks above the zero level, the price is considered to be entering a bullish market state. Similarly, when the olive line of the PDO goes below the zero level, the price is considered to be entering a bearish market state.
You can successfully use divergences with that gauge. When the price is making higher highs and lower highs, you can look for bearish divergence. On the other side, when the price is making lower lows and higher lows, you can look for bullish divergence.
The indicator is displayed in a separate window placed just below the main trading chart.
It fits all kinds of timeframes and currency pairs.
The default indicator settings can be modified directly from the input tab. Feel free to experiment with the settings and parameters to fit your personal preferences. Let’s take a closer look at these inputs below.
Period – defines the moving average calculation period;
Method – defines the moving average calculation method which can be expressed as simple, exponential, smoothed, and linear weighted;
Applied price – defines the moving average calculation price which can be expressed as close price, open price, high price, low price, median price, typical price, and weighted price.
How to set up the Percent Difference Oscillator indicator in MT5?
Copy and paste the PDO.mq5 or PDO.ex5 indicator files into the MQL5 folder of the Metatrader 5 trading platform.
You can gain access to this folder by clicking the top menu options, which goes as follows:
File > Open Data Folder > MQL5 > Indicators (paste here).
Now go to the left side of your MT5 terminal. In the Navigator find the gauge name, right-click it and select Attach to the chart.
The Percent Difference Oscillator indicator is well worth adding to your trading collection but remember about having realistic expectations. Just like any other technical analysis tool, is not capable of providing accurate signals 100% of the time. Thus, this forex indicator provides false signals occasionally. Its performance will vary significantly depending on market conditions. Feel free to develop your own trading system based around it.
Percent Difference Oscillator Indicator Free Download
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