What is Absolute Price Oscillator (APO)?

The Absolute Price Oscillator 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 is used in two different ways! One, to pinpoint the momentum of the price, and second to spot divergences. The indicator line oscillates 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.

Absolute Price Oscillator Indicator

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 Absolute Price Oscillator 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.

Absolute Price Oscillator

Building The APO Trading Strategy in Mudrex

Strategy:- 

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:-

Absolute Price Oscillator

For selling we will use the following settings:-

Absolute Price Oscillator

Final Strategy:-

Final Strategy

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 259.68%

Final Backtest

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