Coppock Curve indicators can assist in recognizing long-term trend trading opportunities, and help identify how best to trade those opportunities. They can also be helpful for avoiding bad trades while staying within profitable trades.
This indicator was specifically created for monthly charts, appealing to investors and position traders alike. Alternatively, weekly, daily, or intraday charts may also be attached for more frequent signals.
The Coppock Curve is a momentum indicator
Edwin Sedge Coppock developed the Coppock Curve momentum indicator as a trend following tool to identify long-term buying opportunities in stocks and indexes. It combines short and long Rate of Change calculations into one indicator which can then be smoothed with a 10-month weighted moving average for smoothing purposes – creating a simple indicator suitable for all timeframes.
The indicator can generate buy signals when its slope turns positive when moving below zero and below 0. Its purpose is not to identify tops or price reversals, thus it typically spends most of its time above 0. This makes it best suited for individual stocks and stock market indices rather than currencies or commodities.
Given its averages-based nature, the Coppock curve may not be useful for short-selling purposes; however, it can still serve as an important indicator for trend traders. When using it alongside other indicators and with an emphasis on slope instead of absolute value it can prove invaluable.
Since its creation over 50 years ago, the Coppock Curve is an easy and highly effective momentum indicator that has proven itself time and again. A smoothed momentum oscillator with short and long Rate of Change values to determine whether a trend is changing direction; often used together with Zero Line as pivot point for trader action.
As an example, when Bitcoin trades below its Zero Line it could be an indication of its trend reversing and setting off for a rally; similar considerations apply to all major cryptocurrencies. Furthermore, this indicator can help identify rounded tops of stock markets which are often more common than sharp market bottoms.
Coppock Curve can be used to identify long-term trends across multiple assets, but it is most effective in detecting market uptrends with strong momentum reversing from deep lows (such as oil price crash of 2015). As such, this indicator is ideal for investors seeking long-term investment positions; it may also prove useful for shorter-term trades.
It is a trend-following indicator
The Coppock Curve is a trend-following indicator designed by Edwin Sedge Coppock that can assist traders in identifying long-term buying opportunities. First published in Barron’s magazine in 1965, this monthly closing price data-based indicator utilizes Rate of Change momentum oscillator (ROC) to detect long-term buy signals; it also gives short-term sell signals when it dips below zero line – ideal for longer term traders who wish to trade with dominant trends. Although applicable on any timeframe or trading strategy.
The indicator consists of the sum of two rate-of-change indicators smoothed with a 10-month weighted moving average (WMA), assigning greater weights to recent data points than older ones; therefore, minimizing false signals. Note that it lags behind market trends; therefore it cannot always identify exact market bottoms; however it can help identify price reversals and reveal when a bull market may start.
Trend-following investors will find this indicator indispensable, and should incorporate its use with other tools and charts for maximum accuracy. A Hull MA or Know Sure Thing Indicator could be combined to increase accuracy. You can practice trading the Coppock Curve through Tradingsim, an innovative virtual trading platform offering real-time market replay and the best market simulator available today.
One easy way to use the Coppock curve is to plot it on a monthly chart of any stock you are tracking. If the indicator is above zero, that indicates an uptrend, while below zero indicates downtrend. When plotted as histograms on charts, green will indicate above zero histograms while red ones show below zero indicators.
Coppock Curves can be an invaluable tool for identifying long-term buying opportunities, but they may sometimes give false signals due to relying on moving averages for its trend determination. To reduce false signals and make better trading decisions, adjust the settings of this indicator so it covers shorter timeframes; doing this will enable you to see the underlying trend more clearly and make informed trading decisions.
It is a reversal indicator
The Coppock Curve is a long-term momentum indicator suitable for any timeframe and trading style, featuring smoothed momentum readings that help traders identify market reversals from extreme price levels. Often combined with other indicators and chart patterns to enhance its accuracy. First created decades ago and named after Edwin Coppock (its creator), it is often also referred to as the “Very Long Term Momentum Indicator”.
Coppock’s formula utilizes two Rate of Change (ROC) lengths and a weighted moving average (WMA) to smooth out data. ROC lengths are calculated by subtracting the current closing price from that of previous one over 14 periods (months), with one ROC value added onto another before being smoothed by WMA (10 periods).
Traders will have access to a slow but powerful indicator for long-term buy opportunities. Keep in mind, however, that this indicator will lag behind price movement and may not accurately pinpoint exact market bottoms.
To calculate this indicator, start with the most recent monthly closing price of DJIA and use its previous month’s close as the basis to establish ROC14; combine these values together then repeat for at least 10 more months until taking a weighted moving average of recent values to create your indicator; compare this indicator against DJIA to identify any significant shifts in its trend.
Coppock Curve Reversals provide traders with a buying signal when the curve crosses above zero line, and investors have used this indicator to identify purchasing opportunities in major stock markets and exchange-traded funds that track them. They may also help alert them when it is time to consider new long-term investment opportunities such as an ETF or oil ETN.
Calculating an indicator may be straightforward, but its application can be complex as it requires access to past price history. Therefore, beginners are recommended to start by keeping their calculations within monthly time frames as seasonality and other factors can skew results.
It is a support and resistance indicator
The Coppock Curve is an indicator that measures medium and long-term stock market momentum trends. It can be used to detect when bear markets are transitioning into new bull markets, and help investors identify optimal entry points for trades. This indicator uses Rate of Change (ROC) with weighted moving average smoothing to reduce any lag between metrics; providing a better picture of overall market momentum as its fluctuations are less choppy.
Edwin “Sedge” Coppock, an economist by training, created this indicator in 1965 as part of his goal to identify opportunities to buy on the stock market. Originally designed to open long positions on daily charts of stock indices and individual stocks.
To use this indicator, set its period to 20 and select low values of 10 for both ROC14 and ROC11. Once added together, take a 10-period moving average of this number and you should receive an alert if the indicator crosses above zero.
Importantly, it should be remembered that the Coppock Curve provides buy signals only, rather than sell ones. As it was designed as a trend-following indicator to detect trending stocks, its functionality cannot be seen on shorter timeframes such as daily or hourly charts.
Coppock Curve analysis involves searching for signs of divergences between price and indicator readings. When an indicator reaches a new peak or trough before price does, this may be an indicator that your trend is slowing down and it may be wiser to wait for a rally or exit your trade in preparation for future ones.
Since 1970, 19 times since 1970 have seen this Coppock buy signal activated and every single time stocks rallied within three, six, or 12 months following its activation. If it continues, this could present a great buying opportunity similar to COVID-19 buy signals, financial crises, or dot-com crashes of old.