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Successful Trading Decisions with Coppock indicator: Simplest Indicator

Posted By On 5/06/2009 08:29:00 PM Under ,

1. Through this post related to Coppock indicator; aim is to let an average retail investor make a decision for himself that whether a bull trend is starting in stock or a bear trend is going to get started in the life cycle of a stock.

2. To put Coppock indicator in simple language one can state that it is a long term indicator which helps in predicting the start of bull market and announces the ending of bear phase in the market. It is one of the simplest indicators as it only provides two signals i.e. when indicator turns positive; it shows that it is the start of the bull market and when it moves below Zero; it means that bear market is starting.

3. If we have a look at the chart we will see that Coppock Indicator had given a buy signal for Hero Honda as way back as Oct 2008 and it is a History that despite negative trend in Sensex and Nifty stock has scaled a price greater than 1100 as on today. Thus one can conclusively state that bull market will remains in motion till the time the Coppock indicator figure is above Zero and vice versa for bear market.

Dangers of Coppock indicator
One must understand the danger of the indicator's over-reliance on the 14- and 11-month’s rate of change, which have been known to create buy signals during bear market rallies, particularly where those rallies have lasted for several weeks. These can easily be created, particularly where too many investors seek to call the start of the next bull market. Thus one has to be careful while using this indicator.

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