Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

RichardCox

Understanding the Coppock Curve

Recommended Posts

Understanding the Coppock Curve

 

First introduced by Edward Coppock in the early 1960s, the Coppock Curve (CC) is an oscillator that was originally designed to alert traders to potential shifts in an underlying market trend. For most of its history the CC has been used to send signals in long-term strategies in the major stock benchmarks. But these tools can be applied to all asset classes in any time frames as a means for generating trading signals and establishing new market positions.

 

Design and Calculations

 

“When Coppock was originally working on developing the indicator most of his focus was centered on price activity on monthly charts,” said Sam Kikla, markets analyst at BestCredit. “So for traders with a longer-term perspective, the CC might prove to be highly effective.” For the most part, CC trading signals are relatively infrequent when using monthly charts so for those looking to be more selective about their positions, this is an approach that has clear advantages. For those looking to identify a larger number of trading signals, this can be accomplished by moving down to a daily or hourly time frame.

 

In generating its signals, the CC uses a weighted moving average of an asset’s Rate of Change (ROC). This essentially means that the CC is a momentum indicator that will fluctuate and oscillate around a zero line (below and above the line). The CC is composed of three variables: a Long ROC interval (14 periods), a Short ROC interval (11 periods), and a weighted moving average (default is usually 10 periods). The number of periods is essentially an indication of the number of candlesticks used in determining the value of each CC component. To calculate the CC, we take the sum of the Short and Long ROC intervals (11 and 14 periods) and then take a 10 period weighted moving average of that sum. The mathematical formula for the CC looks like this:

 

CC = 10-interval weighted moving average of the 14-interval ROC + 11-interval ROC

 

Calculations for the ROC look like this:

 

ROC = [(Interval Close - Interval Close N periods previous) / (Interval Close N periods previous)] x 100

 

For the CC, the N variable used in the ROC calculation can be substituted by 11 and 14 (the interval period for the Short and Long ROC measurements). Two individual ROC calculations are taken. Once plotted on a chart, the oscillator looks like the chart graphic shown below:

 

e1ffgi.jpg

 

The CC Trading Strategy

 

The key aspect of the CC is the zero line. This is the region that acts as a trigger for trading signals. A positive bias (for long positions) is seen when the CC is moving above the zero line. Bias is negative (for sell positions) when the CC falls back below the zero line. Alternatively, the oscillator can also be used as a tool for knowing when to take profits. For example, long positions should be closed if the CC turns negative. Short positions should be closed if the CC rises into positive territory. We can see a live example of this in the chart below, where green arrows show instances where the bias is bullish and red arrows show in cases where markets have turned bearish.

 

24bbq.png

 

In the above chart, we can see that time perspective is the daily interval. If a trader was interested in receiving more trading signals (both bullish and bearish), the best idea would be to move down to an hourly chart. If a trader was looking to be more selective about the number of signals received, it would be preferable to move up to a weekly or monthly chart.

 

Alternative Settings

 

Of course, there are always additional options for changing the default settings. And when traders are looking to implement the CC in different time frames (i.e. weekly or lower), additional adjustments can help to fine-tune the indicator. When using the default settings on the lower time frames, entry and exit signals tend to happen somewhat late and this means that it is harder to capture most of the projected move. This also creates a greater potential for losses, so there is nothing wrong with adjusting the CC settings in order to capitalize on price moves on the lower time frames.

 

Specifically, you can increase the speed of the oscillations in the CC by reducing the the level of your ROC variables. This will also give you a larger number of trading signals. If you raise the level of your ROC variables, the oscillations in the CC will slow and give you a smaller number of trading signals. If you want the CC to produce exit and entry signals that are earlier, you should decrease the weighted moving average. This change can also lead to a trading signals that are sent with greater frequency. Delaying these signals can help those that are looking for more confirmation that a signal is validated, and this can be accomplished by increasing the levels for your weighted moving average.

 

Filtering-Out Poor Signals and Potentially Bad Trades

 

Any indicator carries with it the potential to send out a false signal, so it is always important to look for ways of reducing these as much as possible. One strategy to filter out potentially false signals is to wait for signals that agree with the direction of the dominant trend. These are the situations that include the potential for creating the biggest price moves (and the greatest profits). The best way to accomplish this is to identify your signal and then to move up one charting time frame.

 

For example, if you see the CC cross into positive territory on a daily chart, pull out to a weekly chart in order to make sure that the longer term trend momentum is also positive. If you notice that the CC starts to cross into negative territory, it is generally a good idea to close the position. But, for conservative traders, it would not be a good idea to reverse the trade into a new short position.

 

Points to Remember

 

To weed-out bad signals, it should be remembered that choppy price action can lead to multiple signals in both directions. This reduces the probability that each signal is giving you accurate information and increases the chances for a losing trade. For this reason, the CC is best used in cases where there is a clear trend that can be found in the market, as this will lead to more signals that agree with one another.

 

It should also be remembered that the CC gives no exact indication of where stop losses should be placed. This, of course, does not mean that stop losses should be ignored but other methods (such as plotting a swing high or swing low) should be used as a means for determining where to exit a trade. If the CC reading does not agree with your open trade, that trade should be closed. But this approach is somewhat vague and should not be used as a substitute for using a hard stop loss.

 

As a momentum oscillator, the Coppock Curve helps traders to identify shifts in long-term market trends. Many would argue that the tool is best used on monthly time frames, but there is a good deal of flexibility in place for the indicator to be adjusted with more specificity. For these reasons, it makes sense to test different settings with a demo account so that you are able to get a better feel for the Coppock Curve and match its strengths with your broader strategy approach.

calendar.thumb.jpg.0d74d9175931a50a885814545bb1c9e2.jpg

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • How's about other crypto exchanges? Are all they banned in your country or only Binance?
    • Be careful who you blame.   I can tell you one thing for sure.   Effective traders don’t blame others when things start to go wrong.   You can hang onto your tendency to play the victim, or the martyr… but if you want to achieve in trading, you have to be prepared to take responsibility.   People assign reasons to outcomes, whether based on internal or external factors.   When traders face losses, it's common for them to blame bad luck, poor advice, or other external factors, rather than reflecting on their own personal attributes like arrogance, fear, or greed.   This is a challenging lesson to grasp in your trading journey, but one that holds immense value.   This is called attribution theory. Taking responsibility for your actions is the key to improving your trading skills. Pause and ask yourself - What role did I play in my financial decisions?   After all, you were the one who listened to that source, and decided to act on that trade based on the rumour. Attributing results solely to external circumstances is what is known as having an ‘external locus of control’.   It's a concept coined by psychologist Julian Rotter in 1954. A trader with an external locus of control might say, "I made a profit because the markets are currently favourable."   Instead, strive to develop an "internal locus of control" and take ownership of your actions.   Assume that all trading results are within your realm of responsibility and actively seek ways to improve your own behaviour.   This is the fastest route to enhancing your trading abilities. A trader with an internal locus of control might proudly state, "My equity curve is rising because I am a disciplined trader who faithfully follows my trading plan." Author: Louise Bedford Source: https://www.tradinggame.com.au/
    • SELF IMPROVEMENT.   The whole self-help industry began when Dale Carnegie published How to Win Friends and Influence People in 1936. Then came other classics like Think And Grow Rich by Napoleon Hill, Awaken the Giant Within by Tony Robbins toward the end of the century.   Today, teaching people how to improve themselves is a business. A pure ruthless business where some people sell utter bullshit.   There are broke Instagrammers and YouTubers with literally no solid background teaching men how to be attractive to women, how to begin a start-up, how to become successful — most of these guys speaking nothing more than hollow motivational words and cliche stuff. They waste your time. Some of these people who present themselves as hugely successful also give talks and write books.   There are so many books on financial advice, self-improvement, love, etc and some people actually try to read them. They are a waste of time, mostly.   When you start reading a dozen books on finance you realize that they all say the same stuff.   You are not going to live forever in the learning phase. Don't procrastinate by reading bull-shit or the same good knowledge in 10 books. What we ought to do is choose wisely.   Yes. A good book can change your life, given you do what it asks you to do.   All the books I have named up to now are worthy of reading. Tim Ferriss, Simon Sinek, Robert Greene — these guys are worthy of reading. These guys teach what others don't. Their books are unique and actually, come from relevant and successful people.   When Richard Branson writes a book about entrepreneurship, go read it. Every line in that book is said by one of the greatest entrepreneurs of our time.   When a Chinese millionaire( he claims to be) Youtuber who releases a video titled “Why reading books keeps you broke” and a year later another one “My recommendation of books for grand success” you should be wise to tell him to jump from Victoria Falls.   These self-improvement gurus sell you delusions.   They say they have those little tricks that only they know that if you use, everything in your life will be perfect. Those little tricks. We are just “making of a to-do-list before sleeping” away from becoming the next Bill Gates.   There are no little tricks.   There is no success-mantra.   Self-improvement is a trap for 99% of the people. You can't do that unless you are very, very strong.   If you are looking for easy ways, you will only keep wasting your time forgetting that your time on this planet is limited, as alive humans that is.   Also, I feel that people who claim to read like a book a day or promote it are idiots. You retain nothing. When you do read a good book, you read slow, sometimes a whole paragraph, again and again, dwelling on it, trying to internalize its knowledge. You try to understand. You think. It takes time.   It's better to read a good book 10 times than 1000 stupid ones.   So be choosy. Read from the guys who actually know something, not some wannabe ‘influencers’.   Edit: Think And Grow Rich was written as a result of a project assigned to Napoleon Hill by Andrew Carnegie(the 2nd richest man in recent history). He was asked to study the most successful people on the planet and document which characteristics made them great. He did extensive work in studying hundreds of the most successful people of that time. The result was that little book.   Nowadays some people just study Instagram algorithms and think of themselves as a Dale Carnegie or Anthony Robbins. By Nupur Nishant, Quora Profits from free accurate cryptos signals: https://www.predictmag.com/    
    • there is no avoiding loses to be honest, its just how the market is. you win some and hopefully more, but u do lose some. 
    • $CSCO Cisco Systems stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?CSCOSEPN Septerna stock watch for a bottom breakout, good upside price gap
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.