Percentage Price Oscillator (PPO) on Gold

What it shows

Three things in one pane under the price: the PPO line (blue), its Signal line (orange) and a histogram of the gap between them, around a zero line. The histogram has four colours: dark green above zero and rising, light green above zero and not rising, light red below zero and rising, red below zero and not rising.

How Pravex works it out

Work out a fast average and a slow average of the source. Both are EMAs unless you switch the average type for the two lines to SMA.
PPO = 100 × (fast − slow) ÷ slow.
Averaging the PPO itself, 9 values by default, gives the orange signal; it can be an EMA or an SMA.
Histogram = PPO − Signal line.
As a made-up example, a fast average of 102 against a slow one of 100 gives a PPO of 100 × 2 ÷ 100 = +2.

Settings

Setting	Default	What changing it does
Source	Close	The price both averages are built from. Close is the usual choice; hlc3 pulls in each candle’s range.
Quick average length	12	Candles in the fast average. A smaller number makes the PPO react sooner and swing more.
Slow average length	26	Candles in the slow average. A larger number gives a wider gap and a slower line.
Signal average length	9	Candles in the average that makes the Signal line. A shorter signal crosses the PPO more often. The largest value is 50.
Average type for the two lines	EMA	Choose EMA or SMA for the fast and slow averages. The SMA treats every candle in the window the same; the EMA weighs recent candles more.
Average type for the signal	EMA	Choose EMA or SMA for the Signal line.

How traders read it

The PPO above zero means the fast average is above the slow one, and below zero means the reverse. A cross of the zero line is the plainest trend change this indicator gives.

A cross of the PPO over its Signal line is the quicker signal. The histogram shows it early: it shrinks toward zero before the lines cross.

Because the PPO is a percent, you can compare its height across years or across markets, which a plain MACD does not allow. Noting how high the PPO reached on earlier gold rallies, then watching whether the new one gets as high, is a fair test of a tiring trend.

When it misleads

Moving averages lag, so every cross arrives after the move has started. In a sideways stretch the PPO hugs zero and crosses its Signal line again and again with no follow-through. On gold, a calm stretch can flatten both averages and produce tiny, meaningless crosses.

Questions and answers

PPO vs MACD: what is the difference?

MACD is the fast average minus the slow one in price units. The PPO divides that gap by the slow average, so it is a percent and compares fairly across price levels.

Can I compare a PPO reading from 2020 gold with today’s?

Yes, that is what it is for. A PPO of +1 means the fast average sits 1% above the slow one at any price, while a MACD of +10 meant far more when gold was half its current price.

What does the PPO histogram show?

It is the PPO minus its Signal line. The colour tells you whether it is above or below zero and whether the bars are growing.

Why are the PPO defaults 12, 26 and 9?

They match the classic MACD lengths. The PPO is that MACD divided by the slow average, so both cross zero on the same candles; signal crosses can land a candle apart when price moves a lot, because the divisor moves too.