What is Absolute Price Oscillator (APO)?
This indicator entails a simple calculation that provides powerful insights at the same time. It combines trend and momentum components and is calculated by obtaining the difference between the two EMAs. This indicator can be used in two different ways, to pinpoint the momentum of the price or to spot divergences. The indicator is displayed by a line oscillating around zero. When it crosses above the zero line, the fast-moving average is above the slow one, suggesting that the price is gaining bullish momentum and sending a buy signal. In the same way, when the APO crosses below the zero line, the bearish pressures are dominating the price and it generates a sell signal.
The Absolute Price Oscillator is a Momentum Oscillator indicator and is based on the absolute differences between two moving averages of different lengths. These are the ‘Fast’ and ‘Slow’ moving averages. The APO indicator subtracts the moving averages and predicts the market’s trend, either bullish or bearish.
How To Calculate the APO Indicator
Formula:- po= ema(short) – ema(long)
Why Use The APO Indicator
The Absolute Price Oscillator displays the difference between two exponential moving averages of a security’s price and is expressed as an absolute value. It rates the trends strength in relation to the moving between the two moving averages with short-term momentum being the catalyst. The most popular setups are to use the 14-day and 30-day EMAs, respectively.
How to Use The APO Indicator
Bullish Scenario:- APO oscillates around line 0, thus if the APO value is moving above the 0 line and staying there then it shows an uptrend hence a bullish market.
Bearish Scenario:-If the APO value goes below 0 and remains there it indicates a downtrend hence a bearish market.
Building The APO Trading Strategy in Mudrex
BUY:- APO crosses up 0:: Short period=9, Long period=14
SELL:- APO crosses down 0:: Short period=9, Long period=14
TIME FRAME:- 4Hrs
Creating on Mudrex:-
We will use 2 APO indicator blocks. One for selling and One for buying.
For buying we will use the following settings:-
For selling we will use the following settings:-
Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 259.68%