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A.K.A. Very Long Term (VLT) Momentum indicator (using monthly timeframes)
Named for Edwin Sedgewick Coppock - this indicator was developed as a way to find the upturns from major stock market bottoms.
He based his settings on how long it takes a person to grieve, and to get over the loss of a loved one (11-14 months according to an Episcopal priest). Coppock hypothesized that human psychology related to investment losses was similar to the grieving process, and so he sought to use that time period in creating an indicator that would help him find the really important long term price bottoms.
The default settings of the indicator combines 11-month and 14-month rates of change for the monthly closes (he used the DJIA as the index to measure), and then smoothed with a 10-month weighted moving average.
When the Coppock Curve gets down to a very low level and then turns up, it signals an important long term entry point. After it gives such a signal, the subsequent uses of the Coppock Curve are not as clear cut.
It works on different timeframes and settings but it might be a better confirming indicator on shorter timeframes.
A buy signal is generated when the indicator is below zero and turns upwards from a trough. The indicator is trend-following, and based on averages, so by its nature it doesn't pick a market bottom, but rather shows when a rally has become established.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
