The Coppock Curve (CC) was introduced by economist Edwin Coppock in an October 1962 issue of Barron's. While useful, the indicator is not commonly discussed among traders and 澳洲幸运5开奖号码历史查询:investors. Traditionally used to spot long-term trend changes in major 澳洲幸运5开奖号码历史查询:stock indexes, traders can use the indicator for any time and in any market to isolate potential trend shifts and generate 澳洲幸运5开奖号码历史查询:trade signals.

The Coppock Curve

Co🍃ppock initially developed the indicator for long-term monthly charts; this will appeal to long-term investors, as signals are quite infrequent on this timeframe. Drop down to a weekly, daily, or hourly time frame and the signals become progressively more abundant. 

The indicator is derived by taking a weighted moving average of the 澳洲幸运5开奖号码历史查询:rate-of-change (ROC) of a market index such as the 澳洲幸运5开奖号码历史查询:S&P 500 or a trading equivalent such as the S&P 500 SPDR ETF. Simply put, it is a momentum 澳洲幸运5开奖号码历史查询:indicator that oscillates above and below zero.

There are three variables within the indicator: The Short ROC Period and Long ROC Period are generally set at 11 and 14, respectively; the weighted moving average (WMA) is typically set at 10. The period indicates how many price bars are used in the ind🌺icator's calculation. Coppock preferred monthly price bars, but traders can use any size price bars, including 1-minute, hourly, daily, and so on.

Coppock came up with 11 and 14 periods for the ROC part of the calculation after being told by an Episcopal priest that the average person's mourning period is 11 to 14 months. Coppock inferred that a downtrend was like a mourning period, so he used these figures. The Coppock Curve is calculated as a 10-month WMA of the sum of the 14-month rate of change and the 11-month rate of change for the index. 

For those mathematically incl💮ined the formul༒a is:

Coppock Curve = WMA[10] of (ROC[14] + ROC[11])

Where ROC = (Price - Starting Price) / Starting Price and WMA = Weighted Moving Average

The Coppock Curve is just one of a wide variety of technical indicators 👍uses to guide your trading decisions.

Coppock Curve Strategy

The zero line of the Coppock Curve acts as a trade trigger; buy when the CC moves above zero, and sell when the CC moves below zero. Investors can use the 澳洲幸运5开奖号码历史查询:sell signal to close out their 澳洲幸运5开奖号码历史查询:long positions and then re-initiate long positions when CC crosses back above zero. Traders who wish to be more active can close out longs and initiate short trades when the CC crosses below zero.

Figure 1 shows the basic strategy applied to a monthly chart of the S&P 500 index. A 澳洲幸运5开奖号码历史查询:buy signal was generated in 1991 followed by a 澳洲幸运5开奖号码历史查询:sell signal in 2001. This would have allowed the investor to avoid much of the decline in the rest of 2001 and 2002. A buy signal was generated in 2003 with a signal to sell in 2008. The indicator would have again saved the investor from the rest of the decline in 2008 and early 2009. Another 𝓰buy signal was geꦏnerated in early 2010, and that position remains open until the CC moves below zero.

Figure 1. S&P 500 Monthly Chart with Coppock Curve

In Figure 2, the strategy is applied to a daily cha😼rt of the S&P 500. Many more signals are generated, appealing to more active traders who wish to enter and exit on each price wave.

Figure 2. S&P 500 Daily Chart with Coppock Curve Signals

Adjusting Settings

While the typical indicator settings work well on monthly charts, they may not work as well on week🐻ly or shorter timeframes. In Figure 2, for example, entries and exits occur a little too late in the move to extract much of a profit from the price waves and would result in losses on a number of trades.

Decreasing the rate-of-change variables will increase the speed of the fluctuations in the CC and increase the number of trade signals. Increasing the rate-of-change variable will slow the fluct⭕uations and produce fewer sig꧙nals. 

If you wish to receive earlier entry and exit signals, decrease the WMA. The number of trade signals may increase with t꧃his adjustment also. To wait for more confirmation and receive𒈔 later entry and exit signals, increase the WMA; this may also decrease the number of trade signals.

By decreasing the WཧMA to 6 (instead of 10), entries occur a bit earlier in the up moves, and exits (and 🧜potential short trades) occur a bit earlier in the down moves. In Figure 3, the vertical lines on the price portion of the chart reflect entries and exits based on typical settings (14,11,10) while the vertical lines on the Coppock Curve portion of the chart reflect entries and exits based on adjusted settings (14,11,6). The adjusted settings shift the entries and exits slightly to the left; such adjustments can have a large impact on profitability or losses.

The adjusted settings also created a new buy𝓰 and sell sig꧃nal in April 2014, which is not marked on the chart.

Figure 3. S&P 500 Daily Chart with Adjusted Coppock Curve Settings

Filtering Trades

Active traders may wish to take trade signals only in the same direction as the dominant trend, as this is where most of the profits lie. On a longer-term chart, note the trending direction. I꧋f trading on a daily time frame, the longer-term chart would be weekly. If the Coppock Curve𒊎 is above zero on the weekly, only take long trades on the daily chart. Sell when a sell signal occurs, but don't take short trades because this would be against the dominant trend. 

If the dominant trend is down, take only short trades in a shorter time frame. Exit 澳洲幸运5开奖号码历史查询:short positions when a buy signal occurs, b🍷ut don't establish a long position, as this would be against the dominant downtrend. 

Adjust the settings of the ind♏icator on both time frames to create the num☂ber of trade signals you are comfortable with.

Special Considerations

When the price is moving in a choppy fashion, especially on smaller timeframes, multiple signals can be generated resulting in numerous very short-term, and potentially unprofitable, tradesꦉ. The indicator is best applied to trending markets, which is why establishing a dominant trend on a longer time𓄧frame can help filter some potentially poor trades on lower time frames. 

The strategy does not include a 澳洲幸运5开奖号码历史查询:stop loss to cap the risk on each trade, but traders are encouraged to implement their own stop loss to avoid excessive risk. When initiating a long position, a stop can be placed below the recent 澳洲幸运5开奖号码历史查询:swing low in price, and when initiating a short position, a stop can be placed above a recent 澳洲幸运5开奖号码历史查询:swing high in price.

The Bottom Line

The Coppock Curve is a momentum 澳洲幸运5开奖号码历史查询:oscillator originally designed to point out sh♏ifts in the long-term trend of stock indexes. It does a good job of pointing out these trend changes on the monthly chart. Shorter-term traders can also use the indicator, and some adjustments to the settings may be required for these shorter time frames. Traders are encouraged to test out the strategy on their own markets and timeframes and make appropriate setting adjustments before implementing the strategy in the live market.