Using stock movement indicators is essential for defining your investment strategies. That’s because these numbers show the main trends in the market, making it easier to identify whether it’s a good or bad time to buy and sell. If you are looking for a new analysis technique, check out Coppock Curve.
Keep reading to find out how it works!
What is Coppock Curve?
The Coppock Curve is a concept developed by economist Edwin Coppock in the 1960s. The theory was first published in 1962 by Barron’s Magazine, which is part of Dow Jones & Company, one of the leading Wall Street publications.
An interesting point to emphasize is that the technique was developed based on the natural cycle of human beings: the birth, life experiences, death and mourning of those who remained, until starting again. So, the economist decided to divide the market movements that tended towards growth as “life”, and the falls as “death”.
His goal was to understand how long people spent “mourning” before returning to normal life, that is, buying more shares and making them grow again.
Today, it can be used to invest in different types of assets, including the purchase of cryptocurrencies.
How to Do the Analysis?
The idea of this indicator is to carry out monthly analyzes for the movement of shares in the long term, although it can also be used within other shorter periods. In other words, it works similarly to Momentum, which aims to show the progression of the asset as time passed.
The parameter is the 0 axis. The oscillation of the line up and down is what will define whether there is a buy or a sell signal. For the calculations, three variables are used:
10-period weighted average (WMA);
Long-term rate of change (ROC) (14);
Short period rate of change (ROC).
The formula used is:
Coppock Curve = WMA of (ROC + ROC).