Trading Indicator Toolbox – Coppock Curve
The original Analysis Toolbox articles discussed the various market cycles including trends and continuations. This part of the The Trader’s Indicator Series focuses on the Trading Indicator Toolbox, as we will discuss various indicators that are found on most trading platforms. We will discuss the indicator in the context of the chosen market, and if it resonates with you, please continue to do your own analysis with it. Trading successfully is all about feeling comfortable with a methodology and using that system repeatedly even when boredom sets in. I will be discussing indicators in alphabetical order that can be found on the MotiveWave platform. (for a free 2-week trial CLICK HERE)
Coppock Curve Trading Indicator
The Coppock Curve is a momentum trading indicator which attempts to capture trending markets. Even though Edwin Coppock introduced the indicator in Barron’s in October 1965 for stocks, it can be applied to any market, from forex to stocks to commodities. Many indicators which determine trend are called directional indicators, meaning they show whether the market is in an uptrend or a downtrend. This indicator was originally designed to identify long-term buying opportunities in the S&P500 and Dow Industrials specifically on the monthly chart. In the S&P monthly chart below, the buying opportunity is triggered when the indicator moves from negative to positive territory above the zero line. One would exit a long position when the indicator moves from positive to negative territory below the zero line. These sell signals could be used to exit the stock market and move into cash, in order to reduce market exposure during bear markets.
While it was not used for sell signals, traders today have adapted this indicator for other markets besides the stock indexes and have used it for sell signals as well.
The calculation is as follows:
Coppock Curve = 10-period WMA of 14-period RoC + 11-period RoC
Where WMA = Weighted moving average and RoC = Rate-of-Change
Coppock Curve Trading Indicator on the charts
In the monthly S&P chart below, the Coppock Curve signaled long in January 2010 and stayed long until it briefly went below the zero line in February 2016 until June 2016. In a strong monthly uptrend, this indicator removes the noise that would be evident on a daily time frame. See the daily chart below where there are multiple signals as the indicator moves above and below the zero line.
This indicator is useful to stay in the trend for a long-term position taker and is flexible for a trader following the daily charts as well.
USING THE TRADING INDICTOR
Moving to other markets, the EUR/USD Daily chart below provides buy and sell signals in a rather choppy market.
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