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Coppock Curve

The Coppock Curve was developed by Edwin Sedgwick Coppock in 1962 and featured in the November 1994 issue of Technical Analysis of Stocks & Commodities, in the article "The Coppock Curve", written by Elliot Middleton:

"We are creatures of habit. We judge the world relative to what we have experienced. If we're shopping for a mortgage and rates have been in the teens (as they were in the early 1980s) and then drop to 10%, we are elated. If, however, they've been at 8% and then rise to 10%, we are disappointed. It all depends on our perspective. The principle of adaptation-level applies to how we judge our income levels, stock prices and virtually every other variable in our lives. Psychologically, relativity prevails..."
-- Taken from Stocks & Commodities, V. 12:11 (459-462): The Coppock Curve by Elliott Middleton

Interpretation

www.cmsfx.comThe moving average is the simplest form of adaptation-level. The Coppock Curve Indicator is a longer term oscillator based on adaptation-levels, but in a different way. Oscillators usually begin by calculating a % change of current price from some previous price, where the previous price 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 prices relative to a year ago and we see that this month the market is up 15% over a year ago, last month it was up 12.5% over a year ago, and 10%, 7.5% and 5% respectively the months before that, then we may gauge that the market is gaining momentum.

Basic signals can be generated using the Coppock Curve by trading reversals from extreme levels. Looking for divergence and trendline breaks may also be useful.

Implementation

The ROC Periods, MA1 Periods, and MA2 Periods inputs have been parameterized to allow the user full customization of this indicator. The default input parameters of this indicator are set based on the article in Stocks & Commodities, V. 12:11 (459-462): "The Coppock Curve" by Elliott Middleton. The input levels may need to be adjusted to better fit the dynamic nature of the foreign exchange currency markets (FOREX). A zero line reference point has been included in this indicator as a visual reference point only.

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