Ask Colin

Is it correct that the Coppock Indicator is another form of a Momentum Oscillator which is used to detect trends?

Yes and no.

Yes, it is a momentum oscillator. As described in my Shares magazine article December 1999, the Coppock indicator is a weighted moving average of the sum of two rates of change. Rate of change is a standard momentum oscillator. Summing two of them does not really change the character of the indicator. The moving average simply smooths the line. So, the Coppock indicator should be seen as a very specific long-term form of the generic indicator type known as a momentum oscillator.

No, it is not used to detect trends. Coppock stressed that it does not give you turning points. It can be many months early or late. Its signal is simply to warn us to begin accumulating shares for long-term appreciation. He was also specific about how to do this, which takes account of the fact that the indicator is not a precise timing indication.

The only really correct way to detect trends is from the price action, or in this case the movements of the market index itself. Trend following indicators like trend lines, moving averages (but not of oscillators), MACD, Directional Movement and so on will all do a better job than the Coppock indicator.

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