The Center of Gravity indicator, which is also known as the COG indicator, is a graphical tool that helps to identify support and resistance levels. The Center of Gravity indicator is a technical indicator which is developed by John Ehlers in 2002. It is mainly used to identify potential turning points in the price as early as possible. The basic form of the indicator is as an oscillator, formed by means of a weighted moving average. It is by far new compared to many known indicators but is increasing in popularity, as a method of trying to gain insights into future price swings.
COG being an oscillator mainly offers two main benefits: a low lag in response to price and a clear turning point. There are several different implementations of the root concept. Despite their differences, these all effectively aim to achieve the same thing: to identify where the outer limits of a trading range lie. The COG indicator is based on a simple calculation that takes into account the closing prices of the last “n” periods and generates straight-forward trading signals based on a crossover strategy.
When To Use A Center Of Gravity Forex Strategy
The COG is a leading indicator. Leading indicators tend to be useful in range-bound markets, and can be used to identify where the upper and lower bounds of the range are likely to be. This helps in trading turning points in the price. The COG system is ill-suited to a trending market, as trying to trade these inflection points in such circumstances can be risky. It’s imminent to first identify a range-bound market.
The Traders want a market that is fluctuating regularly up and down, but with no clear overall net movement. One might find that another indicator or a combination of other indicators will help them in identifying a sideways moving market.
The usefulness of a technical indicator can be enhanced by comparing its findings with that of another indicator. The best indicator in the world is going to be wrong a fair amount of the time hence no one can guarantee that as the calculations are mostly mathematical.
Characteristics Of Center Of Gravity Indicator
Following are the characteristics of the Center of gravity indicator
- It uses the platform of MT4 traders
- It uses all currency pairs
- The trading time of this indicator is around the clock, no time limit is specific
- H1 and higher timeframes are recommended for this indicator