The same mechanism as MACD, but divided by the price level and expressed as a percent. Showing the spread as a percentage lets you compare the strength of momentum across expensive and cheap symbols, and across past and present, on one common scale.
The Percentage Price Oscillator (PPO) is a momentum oscillator that recasts the same idea as MACD into a percentage.
It takes the spread between two exponential moving averages (EMAs), one fast and one slow, and expresses that drive as a single line. So far this is exactly MACD.
The difference is the final step. Where MACD shows the EMA spread in raw price units, the PPO divides that spread by the slow EMA and turns it into a percent.
Why divide? The MACD value is tied directly to the size of the symbol's price. For a stock at 200 dollars a share versus one at 20 dollars, the same drive produces MACD figures an order of magnitude apart.
By dividing the spread by the price level, the PPO removes that tie. You can compare the strength of momentum across symbols at different prices, or across the past and present of the same symbol whose price has changed over years, on one common scale. This is the PPO's edge over MACD.
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