Good day everybody,
Welcome to CryptoGod-1's blog on all things crypto. Today we are going to continue the series on Technical Analysis and why it can be such an important asset for new or experienced traders. In this series I am covering some of the different Technical Analysis and Indicators which can be used to help determine market movement and sentiment when trading. For Part XXI the focus will be on Coppock Curves.
Coppock Curves
Coppock Curves is a type of technical indicator which gives the trader long term buy and sell signals. It is generally used on a monthly candlestick chart, and is based of shifts in momentum of a chosen asset. The indicator was originally created as a long-term buy and sell indicator for major indices such as the S&P 500 and the Wilshire 500. When the Coppock Curve indicator is shown as above zero it is an indication of a hold. When the indicator drops below zero it is then an indication of a sell, until it moves back above zero, becoming a signals a buy again.
Calculating Coppock Curves
To calculate Coppock Curves a trader should use the following calculation:
Coppock Curve = WMA10 of (ROC14 + ROC11)
The figures which need to be used are as follows:
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WMA10 = 10-period weighted moving average
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ROC14 = 14-period rate of change
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ROC11 = 11-period rate of change
To find out what these figures are for your chosen asset, a trader should proceed through the following steps:
- Calculate the ROC14 using 14 periods (months) of the most recent monthly closing price relative.
- Calculate ROC11 using 11 periods (months) of the most recent monthly closing price.
- Add ROC14 to ROC11. Continue to do this each period going forward.
- Once there are at least 10-periods of ROC14 data available and added to ROC11, take a weighted moving average of the last 10 values. Continue to do this each period going forward to create the curve.
How to use Coppock Curves
The simple idea behind using the Coppock is by applying it to the monthly chart. The strategy is to buy when the Curve rises above the zero line and consider selling when the Curve falls below zero. As the indicator is shown as an oscillator, it is generally placed below the chart and traders can analyse it alongside the candlesticks. Using the Coppock Curve will give traders a good idea for the long term direction of the asset, whether to buy, hold, or sell.
Below is an example of the Coppock Curve in use on the Binance chart for BTC/USDT 1 month. The candlestick chart is shown above while the Coppock Curve is shown below. As the data is limited given Binance did not have record for long enough the curve looks off. It is shown dropping, and interesting it only dropped below the zero line, which I have shown in white, in July 2022.
I have also shown a Coppock Curve on the 1 week chart, which is also considered a longer timeframe. Here you can clearly see how the curve fluctuates above and below the zero line depending on how the asset is doing.
It rose sharply as the price rose around November 2020, and has been in decline since around February 2021, crossing zero in May. It rose again towards the autumn and winter of 2021 when Bitcoin broke a new all time high, but was on the decline soon after and broke the zero line again in early January 2022. The curve has bounced below zero line since, coming close to crossing above it but always remaining below. If it was to cross above the zero line again and remain in an upwardly trajectory, it would be an indication that crypto could be exiting its winter.
Limitations of Coppock Curves
The biggest drawback of the Coppock Curve is that it can create a false signal. These happen when the curve moves quickly above and below the zero line. This can result in a trader making purchases, and then the indicator will tell them to sell it again soon after, or vice versa.
Another issue with Coppock Curves is the curve fitting. It can be seen as arbitrary in its default settings, and the majority of traders end up changing these settings to ones which will better fit and represent the curve of historical price data. It should be noted that fitting the indicator to provide the best historical signals may not produce better future signals.
Conclusion on using Coppock Curves for TA
As a trader, whether it be day trading or long term trading, using Coppock Curves can be very beneficial in determining when good times to buy, sell, or hold an asset are happening. The Coppock Curves are shown as an oscillator, which is generally placed below the candlestick chart. It is best used in long timeframes, such as one month or one week. When the curve is above zero and rising it is an indication of a good time to buy. When the curve is below zero or dropping, it is considered a good time to sell. It is used best in longer timeframes, although it should be noted that it can produce false signals. This can happen when the curve bounces or moves above and below the zero line quickly. Therefore the Coppock Curves should not be used as a standalone indicator, instead it should be used in conjunction with other indicators to give stronger results and more reliable signals, especially trend indicators.
As stated whether you are experienced or new, Technical Analysis can always be a useful asset when trading. Just remember it is not guaranteed and nobody can predict the future, no matter how certain you believe the patterns to be. It is always just another tool of the trade to help make more informed decisions when trading. It can be easy to get caught into false signals with a large number volatile changes in the oscillator with a Coppock Curves indicator, and it can also show a buy or sell signal which never takes place as part of a false signal.
It is important to use the Coppock Curves along with other TA to get the correct signals for understanding the strength of a trend and when to buy or sell an asset. While Coppock Curves is best used for longer time frame trading, a trader should always zoom in and out. Therefore if trading on with the Coppock Curves on a 1 minute chart to get an overall idea of the state of play of the asset, a trader should also check the 1 week or the 2 week chart to give you a better idea of the overall strength of the buy or sell signals via the Coppock Curves.
You can find the previous parts to the series here:
Technical Analysis - Part I - Exponential Moving Average (EMA)
Technical Analysis - Part II - Relative Strength Index (RSI)
Technical Analysis - Part III - Bollinger Bands (BB)
Technical Analysis - Part IV - Moving Average Convergence Divergence (MACD)
Technical Analysis - Part V - On-Balance Volume (OBV)
Technical Analysis - Part VI - The Average Directional Index (ADX)
Technical Analysis - Part VII - The Aroon Indicator
Technical Analysis - Part VIII - The Accumulation/Distribution Indicator (A/D)
Technical Analysis - Part IX - The Supertrend Indicator
Technical Analysis Part X - Parabolic SAR Indicator
Technical Analysis Part XI - Support & Resistance Levels
Technical Analysis Part XII - Fibonacci Retracement Levels
Technical Analysis Part XIII - The Awesome Oscillator
Technical Analysis Part XIV - The Arnaud Legoux Moving Average
Technical Analysis Part XV - Ichimoku Cloud
Technical Analysis - Part XVI - Footprint Charts
Technical Analysis - Part XVII - Heikin Ashi Candlesticks
Technical Analysis - Part XVIII - True Strength Indicator
Technical Analysis - Part XIX - The Klinger Oscillator
Technical Analysis - Part XX - Connors RSI
Also feel free to check out:
I hope this post was beneficial and of some use, and I plan on continuing the series with the next instalment focusing on Weighted Moving Average. Of course each technical analysis provides different beneficial information, so combining your most trusted and favourite ones can be the best strategy for finding entry and exit points when trading.
Have a great day.
Peace. CryptoGod-1.
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