Coppock Curve Analysis and Coppock Curve Signals
Created and Developed 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 the price movement always moves 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.
Forex Analysis and How to Generate Trading 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 generally begin by calculating a % change of the prevailing price from some previous price point, where the previous price level is the reference point (adaptation-levels).
Edwin Coppock when he created this indicator argued that the market trading participants' emotional state when trading in the market could be quantified and estimated and then estimated by summing and adding up the % changes over the recent past price periods to get an overall and a general estimate of the longer term market trend momentum.
For example, If we compare the prices relative to a year ago & we observe that this month the market is up by 20 percent compared and analyzed to a year ago, last month it was up 15% compared to over a year ago, then we can determine that the market price is gaining momentum in its movement.
Basic signals also can be derived/generated using the Coppock Curve to trade the market price reversals from extreme price levels. Looking for divergence & trend-line breaks may also be combined together to confirm the signal.
Implementation
The input levels of this indicator may need to be adjusted to fit better the dynamic nature of the currency markets trading.
Coppock Curve has a zero mark reference point, but this does not represent the adaptation-levels but it is only a visual reference point only.
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