Time to discuss a less-known momentum indicator: the Coppock Curve. Though similar to other momentum indicators, it possesses distinct qualities that set it apart and allows it to provide more reliable signals. It is known for its simplicity. No wonder that it is gaining popularity rapidly. Let’s explore how we can use this indicator to benefit our trading journey.
The Coppock Curve indicator is a long-term trading indicator used in the cryptocurrency markets. It relies on arithmetic moving averages and incorporates trader psychology. The main purpose of this indicator is to offer buy/sell signals for cryptocurrencies, indicating potential bottom or top points.
The Coppock Curve was created by economist Edwin Coppock in the 1960s. Originally designed for stock markets, it later found application in cryptocurrencies. The curve combines long-term and short-term moving averages to identify potential buy and sell signals, focusing on market psychology and trends.
The Coppock Curve indicator is calculated by comparing current and past period prices, using rate of change calculations, and then applying a weighted moving average.
Its formula is:
Coppock Curve = WMA 10 * (ROC 14 + ROC 11) |
Terms: WMA 10 = 10-period Weighted Moving Average ROC 14 = 14-period Rate of Change ROC 11 = 11-period Rate of Change |
To understand the calculation better, let’s break down the calculator into a few parts.
Here are the steps to launch the Coppock Curve indicator on a TradingView chart.
The Coppock Curve indicator on a Tradingview chart appears as a line that moves above or below a baseline. It is a smooth curve that oscillates, reflecting the indicator’s calculations. The visual representation helps traders identify trends and turning points in the market.
The basic signal that the Coppock Curve indicator shows is:
Basically, the zero line acts as a reference point for traders to analyse the direction of the trend.
It suggests a positive trend or bullish momentum for the crypto. It indicates potential buy entries and long position opportunities.
It indicates a downtrend or bearish reversal in the cryptocurrency’s price. It signifies a potential sell position opportunity.
Coppock Curve Divergence occurs when the direction of the Coppock Curve differs from the price movement of a cryptocurrency.
It happens when the price of a crypto makes lower lows, but the Coppock Curve makes higher lows. This suggests a potential upward reversal in the market.
It occurs when the price of a cryptocurrency makes higher highs, but the Coppock Curve makes lower highs. This indicates a potential downward reversal in the market.
In conclusion, the Coppock Curve proves to be a valuable tool in cryptocurrency trading, offering insights into potential buy or sell signals and trend reversals. Developed by economist Edwin Coppock, its historical application in stock markets has seamlessly transitioned to the dynamic realm of cryptocurrencies. By understanding its calculation, launching it on TradingView and interpreting its signals, traders can enhance their analytical capabilities and make informed trading decisions. The Coppock Curve, with its distinctive features, continues to be a noteworthy asset for traders navigating the complexities of the cryptocurrency market.
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