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How to identify long term trades using Coppock curve?

elearnmarkets | 26 Oct, 2017  | Follow Author | Add to my Favourites 
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The Coppock Curve is a momentum based indicator invented by Edwin Coppock in the year 1965. The signals generated by this curve are actually very simple and helps in identifying long term buying opportunities when the indicator moves from negative to positive territory. Though Edwin Coppock used this to generate buy signals only, however other analysts also use it as a sell signal when there is a cross from positive to negative zone.


Calculation of Coppock Curve


Coppock Curve = 10-period WMA of 14-period RoC + 11-perod RoC

where,

WMA = Weighted moving average

RoC = Rate-of-Change


Trading Signals

In the monthly chart, you will not get many signals using Coppock curve but these limited signals are very strong either way. There is a centre zero line and above which there is a positive territory and below which is seen as a negative area. A buy signal is generated with a crossover into a positive territory while a sell signal is generated when it enters into a negative territory.


Also read: Mastering Inside bar trading strategy


The chart below is the monthly chart of Gravita India where we can see that whenever the Coppock curve has entered the positive territory. You can expect a positive price move in the coming months after it enters above the zero line from the negative territory. After the crossover in the mid of the year 2016, the stock has given more than 400% in span of almost a year.


Flexibility

The Coppock curve is basically a smoothed momentum oscillator where the momentum is measured by ROC and weighted moving average smoothes the data. It implies that we can use this indicator on different time frame including daily, weekly, monthly and in other time frames too.

Higher the timeframe, lower the whipsaws and better the signal.




Trading strategy using Coppock curve and RSI

The below is the Daily chart of KRBL and as you can see that there are more signals in the daily chart than in the weekly and the monthly chart.

As you can see in the chart that when the coppock curve enters the positive zone and simultaneously RSI is also above the mid 50 line, it generates a buy signal. You can exit the trade either using supertrend or else when the Coppock curve enters the negative territory from the positive zone.

You may do NSE Academy Technical Analysis course to learn various aspect of Technical Analysis and to also learn trading strategies to trade in the real market.

The traders who are unable to devote much time in analysing charts of various securities may benefit from scan section in StockEdge mobile app.

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The first time, we took position in the stock when it was trading at 255 and booked our position at around 374 when the Coppock curve went below the zero line. The next position we made at 387and made our exit at 418. We made the final entry in the stock on 17-07-2017 at 398 and now it is trading at 484.7 and the position is still on hold.




Conclusion

The main signal using Coppock curve is generated with positive and negative crossover above and below the centre zero line. Though some aggressive chartist use Coppock curve to look for positive and negative divergence but these divergences do not always result in trend change.Initially this curve was designed for monthly chart, but you may also use in other time frame as well which suits your trading style.

 

Disclaimer:


Elearnmarkets wants to inform you that this post/video is solely for educational purpose. We are not advising any trading or investment ideas. We want to add that the data/indicator/signals contained in this website/post/video are not necessarily real-time nor accurate. All CFDs/traded instruments (stocks, indexes, futures, commodities) and Forex prices are not provided by exchanges but rather by web based charting platforms, and so prices/indicators may not be accurate and may differ from the actual market prices, meaning prices are indicative and not appropriate for trading or investing purposes. Therefore, Elearnmarkets doesn`t bear any responsibility for any trading losses you might incur as a result of using this data/ indicators/charting platform. This analysis is purely based on the technical observations and not meant for investing with real money. Elearnmarkets does not have any position in the market. One can create position in market at his/her own risk. Elearnmarkets or anyone involved with Elearnmarkets will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals/discussions contained within this website/post. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible




About elearnmarkets

www.elearnmarkets.com is a young vibrant company established with the vision of taking online financial education to a new level, both in India and abroad. Guided by their mission of spreading financial literacy, they are constantly experimenting with new education methodologies and technologies to make financial education convenient, effective, and accessible to all. They provide courses on basic finance, Fundamental Equity research, Technical analysis, Economics, Derivatives, Currencies and Commodities and many of their courses are conducted by reputed market experts and certified by leading exchanges like NSE, MCX and NCDEX.


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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor IndiaNotes.com accept any liability whatsoever arising from the use of any of the above contents.




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