Coppock Curve Analysis and Coppock Curve Signals
Created by Edwin Sedgwick Coppock
This indicator was used for technical analysis of Stocks and Commodities in the beginning but was later used to trade Forex.
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-levels applies to how price reacts at certain levels, stocks & currency prices will react in the same way or setup as those observed historically.
FX Analysis and How to Generate Signals
In Forex trading, The Moving Average is the simplest form of an adaptation levels, the price will oscillate around the Moving Average. This forms the basis of this technical indicator, which is a longer-term oscillator technical indicator based on this adaptation levels(moving average), but in a different way.
Oscillators usually begin by calculating a percentage% change of the current price from some previous price point, where the previous price point is the reference point (adaptation-levels).
Edwin Coppock reasoned that the market participants' emotional state could be quantified by summing up the % changes over the recent past to get an overall sense of the market's longer term trend momentum.
For example, If we compare prices relative to a year ago & we see that this month the market is up 20 percent% compared to a year ago, last month it was up 15 % over a year ago, & 10%, 7.50% & 5 percentage% respectively the months before that, then we may determine that the market is gaining momentum.
Basic signals also can be generated using the Coppock Curve to trade market reversals from extreme price levels. Looking for divergence & 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 currency markets trading.
Coppock Curve has a zero line reference point, but this doesn't represent the adaptation-levels but it's only a visual reference point only.
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