Pekipek's PPO Divergence - Enhanced

The Pekipek's PPO Divergence - Enhanced indicator is a momentum-based oscillating tool designed to identify potential trend reversals through the detection of bullish and bearish divergences between price and Percentage Price Oscillator (PPO) values.

Usage

This tool can be used to spot momentum shifts that are often invisible on a standard price chart. By comparing the swing highs and lows of price action against the peaks and troughs of the PPO line, the indicator highlights discrepancies.

• Bullish Divergence: Occurs when the price makes a lower low, but the PPO line makes a higher low. This suggests downward momentum is fading.
• Bearish Divergence: Occurs when the price makes a higher high, but the PPO line makes a lower high. This indicates upward momentum is weakening.
• Long-Term Divergences: When enabled, the indicator looks back over a larger period (defined in settings) to identify broader structural reversals.

The indicator plots circles on the PPO line to signify detected divergence points, allowing users to anticipate potential entry or exit zones.

Details

The indicator calculates the PPO by taking the difference between a Fast Moving Average and a Slow Moving Average, then expressing it as a percentage of the Slow Moving Average. This normalization makes it easier to compare momentum across different assets and price levels.

This enhanced version features:

• Version 6 Migration: Refactored for modern Pine Script performance and to eliminate repainting issues found in older versions.
• Extensive Smoothing: Includes 14 different Moving Average types (EMA, SMA, Hull, ALMA, etc.) for the Fast, Slow, and Signal components, providing high flexibility in filtering noise.
• Multi-Resolution Support: The Slow Moving Average can be calculated using a different timeframe than the chart, allowing for a higher-level trend perspective.

Settings

General Settings

• Use long term Divergences?: Toggles the detection of divergences over an extended lookback period.
• Lookback Period: Sets the number of bars used to determine long-term swing points.

Fast MA Settings

• MA Type: Selects the calculation method (e.g., EMA, SMA, HMA) for the fast component.
• Source: The price input used for the calculation (default is Open).
• Period: The length of the fast moving average.

Slow MA Settings

• Use Different Resolution?: Allows the slow component to be calculated on a different timeframe.
• Set Resolution: Defines the timeframe for the slow MA if the above is enabled.
• MA Type: The calculation method for the slow component.
• Period: The length of the slow moving average.

Signal (D) Settings

• MA Type: Selects the smoothing method for the final PPO line.
• Smoother: The length/period of the final signal smoothing.

FAQ

How do I interpret the colored circles?

Green and red circles represent the standard PPO highs and lows. Blue circles highlight specific points where the algorithm has detected a divergence between price and momentum.

Can I use this for scalping?

Yes, by adjusting the Fast and Slow MA periods to shorter lengths and using a sensitive MA type like Hull or DEMA, you can adapt the indicator for lower timeframe analysis.

How do I access this tool?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.