Coppock Curve Technical Analysis & Coppock Curve Trading Signals

Developed by Edwin Sedgwick Coppock

This indicator was used for technical analysis of Stocks & Commodities in the start but was later used to trade Indices.

The principle behind this is the market psychology of trading, based on the theory that human habit-is predictable. And stock price movement always oscillates in a zigzag sort of manner.

The principle of adaptation levels applies to how price reacts at certain levels, stock & stock prices will react in the same way or pattern setup as those observed historically.

Index Technical Analysis & How to Generate Signals

In stock indices trading, The Moving Average is the simplest form of an adaptation levels, the price will oscillate around the MA. This forms the basis of this indicator, which is a longer-term oscillator indicator based on this adaptation levels(moving average), but in a different way.

Oscillators usually start by calculating a percentage change of the ruling market price from some previous price point, where the previous price level is the reference point (adaptation levels).

Edwin Coppock reasoned that the trading market participants' emotional state could be quantified by summing up the % changes over the recent past to get a general sense of the trading market's longer term momentum.

For example, If we compare prices relative to a year ago and we see that this month the trading market is up 20% compared & analyzed to a year ago, last month it was up 15 % over a year ago, & 10%, 7.50% and 5% respectively the months before that, then we may ascertain that the trading market is gaining momentum.

Basic signals can also be generated using Coppock Curve indicator to trade the market reversals from the extreme price levels. Looking for divergence and indices trend line breaks may also be combined together to confirm the trade signal.

Implementation

The input levels of this indicator might need to be adjusted to better fit the dynamic nature of the trading markets trading.

Coppock Curve has got a zero line reference point, but this does not represent the adaptation-levels but it is only a visual reference point only.

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