Have you ever used the Coppock Curve in TradeStation and Multicharts?
It’s a useful momentum indicator for long-term traders. In fact, we use this indicator only in weekly and monthly charts.
Edwin Sedgwick Coppock introduced the Coppock formula in 1962, he developed this indicator to find the primary trend and the reversal points.
The Coppock Curve is 10 periods Moving Average of 14 periods and 11 periods ROC.
What is ROC? Rate of Changes measures the percent change in price from one period to the next.
Generally, if Rate-of-Change is positive (above the zero-line) the prices are rising.
Traders use this indicator to define the overall direction of the underlying trend.
Ok, now back to the Coppock Indicator
In the beginning, this indicator was used only to generate a buy signal in a monthly chart.
The buy signal is generated when the indicator is below zero and turns upwards above the zero-line.
The zero-line cross is a lagging signal, as is often when you use a trend-following indicator.
Certainly, you can use this indicator to analyze the long-term market trend.
When the curve crosses the zero-line you know that the momentum is positive for this market.
This is the Coppock indicator in TradeStation and MultiCharts:
As you already know this is a lagging indicator, so don’t use it to generate entry or exit signals.
A little tip: we could use a Moving Average of the Coppock Curve to try to anticipate the signal.
As you can see, with moving average crosses the signal becomes faster, but we do not recommend to use it in this way.
Also, this is a trend-follower indicator and for this reason, it’s no good to generate entry signal.
How to use the Coppock Curve
This indicator works best in higher timeframes, for example daily or weekly.
We like to use the Coppock for a multi-market analysis. You can use it to analyze all Standard & Poor’s sectors.
If you are a long-term trader, you can use this indicator to analyze your ETFs or stocks portfolio and modify your market exposure.
On the contrary, if you are an active trader, you can use the Coppock Curve to filter the signals and open a position only in the same direction of the dominant trend.
If trading on an hourly time frame, you can use a daily chart to determine the trend. If the Coppock Curve is above zero on the daily chart, you have to take only long trades in the hourly chart.
This is the code of the Coppock Curve for TradeStation and MultiCharts with Moving Average filter: