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Coppock Curve Forex Technical Analysis and Coppock Curve Forex Trading Signals

Developed by Edwin Sedgwick Coppock

 

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

Coppock Curve Technical Indicator

 

 

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

 

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

 

 

Forex Technical Analysis and Generating Forex Trading Signals

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

 

Oscillators usually begin by calculating a % change of the current price from some previous price point, where the previous price point is the reference point (adaptation-level).

 

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

 

For example, If we compare prices relative to a year ago and we see that this month the market is up 20% compared to a year ago, last month it was up 15% over a year ago, and 10%, 7.5% and 5% respectively the months before that, then we may determine that the market is gaining momentum.

 

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

 

Implementation

The input levels of this indicator may need to be adjusted to better fit the dynamic nature of the foreign exchange currency markets trading.

 

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

Market Sentiment: Did you know that traders and market participants have been buying US Dollars because USD is the best currency to hold when there is a recession – this is because the dollar is held as the reserve currency by most central banks and during recession most traders also prefer to hold this currency, this is why USD is known as a safe haven currency. But now the market sentiment has changed and all the economies are on their way to recovery and most have even returned to economic growth based on the economic reports coming from these countries.

During times of economic growth traders prefer to sell the dollars they had bought and start buying higher yielding currencies. These higher yielding currencies include EURO and Great Britain Pound. This is why the Euro is starting to appreciate against the USD. The EURUSD is trending upwards; Crude Oil Prices have also started to move back up because demand of oil is growing because of the global economic growth, Gold is also in an upward trend because during economic growth the prices of commodities also go up because there is increase in their demand.

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