Trading Worker
Indicator: COPPOCK indicator with Forumla, Strategy, Advantages and Limitations - Trading Worker
Home Login Register

Coppock Curve

The Coppock Curve is a long-term momentum indicator developed by Edwin "Sedge" Coppock in 1962. Originally designed to identify long-term buying opportunities in major stock market indices, it combines rate of change calculations to generate a momentum oscillator that helps identify major market bottoms and potential trend reversals.

Formula

Coppock Curve = WMA(10, ROC(14) + ROC(11))
Where:
WMA = Weighted Moving Average
ROC = Rate of Change
14 and 11 = ROC periods
10 = WMA period

How Coppock Curve Works

The Coppock Curve combines two rate-of-change indicators with different periods and smooths them using a weighted moving average. The indicator typically oscillates around zero, with positive values indicating bullish momentum and negative values suggesting bearish momentum. A key signal occurs when the indicator turns upward from below zero, potentially indicating a major market bottom and buying opportunity.

Trading Strategies Using Coppock Curve

Strategy Examples

  • Buy when the Coppock Curve turns positive from below zero
  • Use zero-line crossovers for trend confirmation
  • Look for divergences between price and the Coppock Curve
  • Combine with other long-term indicators for confirmation
  • Use higher readings to identify strong upward momentum

Support and Resistance Strategy

  • Use Coppock Curve levels as dynamic support/resistance zones
  • Look for price reactions at extreme Coppock values
  • Monitor convergence with key price levels
  • Use crossovers near support/resistance for confirmation
  • Combine with volume analysis at key levels

Trend Identification

  • Sustained positive readings indicate strong uptrend
  • Sustained negative readings indicate strong downtrend
  • Zero line crossovers suggest major trend changes
  • Higher peaks show strengthening upward momentum
  • Lower troughs show strengthening downward momentum

Advantages and Limitations

Advantages

  • Excellent for identifying long-term buying opportunities
  • Reduces noise through smoothing mechanisms
  • Proven track record in major market indices
  • Clear and objective signals
  • Works well for long-term trend following

Limitations

  • Significant lag due to long calculation periods
  • Not suitable for short-term trading
  • Can miss early stages of market reversals
  • Limited use in ranging or choppy markets
  • May generate false signals in volatile conditions

Best Practices When Using Coppock Curve

  • Use the Coppock Curve primarily for long-term investment decisions
  • Combine signals with other long-term technical indicators for confirmation
  • Focus on zero-line crossovers for major trend change signals
  • Consider the broader market context when interpreting signals
  • Use longer timeframes (monthly charts) for more reliable signals
  • Be patient with positions as signals are meant for long-term trades
  • Monitor momentum characteristics through curve steepness
  • Pay attention to divergences between price and Coppock readings
  • Avoid using the indicator for short-term trading decisions
  • Consider fundamental analysis alongside Coppock signals for better results