Coppock Curve Technical Analysis & Coppock Curve Trading Signals

Created by Edwin Sedgwick Coppock

This technical indicator was used for technical analysis of Stocks and Commodities in the beginning but was later used to trade Oil.

The principle behind this is the psychology of trading, based on the theory that human habit is predictable. And crude price movement always oscillates in a zigzag manner.

The principle of adaptation-level applies to how crude trading price reacts at certain levels, stock and crude prices will react in the same way or pattern as those observed historically.

Oil Technical Analysis & How to Generate Signals

In trading, The moving average is the simplest form of an adaptation-level, the crude price will oscillate around the moving average. This forms the basis of this indicator, which is a longer term oscillator based on this adaptation-levels(moving average), but in a different way.

Oscillators usually begin by calculating a % change of the current crude trading price from some previous crude trading price point, where the previous crude price point is the reference point (adaptation-level).

Edwin Coppock reasoned that the market participants' emotional state could be quantified by summing up the % changes over the recent past to get a general sense of the market's longer term momentum.

For example, If we compare crude trading prices relative to a year ago and we see that this month the market is up 20% compared to a year ago, last month it was up 15% over a year ago, & 10 %, 7.50% & 5% respectively the months before that, then we might ascertain that the market is gaining momentum.

Basic signals can also be generated using the Coppock Curve to trade market reversals from extreme crude trading price levels. Looking for divergence and trend line breaks may also be combined to confirm the signal.

Implementation

The input levels of this indicator may need to be adjusted to better fit the dynamic nature of the markets trading.

Coppock Curve has a zero line reference point, but this does not represent the adaptation-level but it's only a visual reference point only.