HOW TO: Center Of Gravity OscillatorIf I could only have one indicator it would need to be versatile. It would need to able to confirm trends, highlight pivots and reversals but most of all it would need to expose epic entries. Lucky there is such an indicator... The Center of Gravity Oscillator (COG).
The COG is yet another masterpiece created by John Ehlers. It is essentially zero lag and enables clear identification of turning points. This indicator is a result of Ehlers research into adaptive filters and was published in an article on page 20 of the May 2002 issue of Stocks and Commodities Magazine. According to the Tradingview docs "The cog (center of gravity) is an indicator based on statistics and the Fibonacci golden ratio."
1. Breakout Trading
Breakout trading is one of the most popular trading strategies and rightly so, there is not much better than watching those candles fly to the moon.
Trend lines and wedges can be made by connecting 2 or more pivot points (as shown above). When the oscillator crosses the trend line traders can expect “boom” like explosions in price action.
Above is an example of a breakout.
Below I’ve marked out some breakouts on 1 hr BTC chart.
Epic breakouts can be found by drawing a trend line along major pivot points. The major pivots should be easy to spot as they stick out above and below the minor pivots. (As shown below on 1 hour chart.)
There are many oscillators that can also pick up breakouts, below are some breakouts marked on the BTC 12 hour chart with my Volatility Oscillator.
Smaller breakouts can be found by drawing a fan from major pivot to minor pivots.
Ive marked out the most obvious breakouts on the ETH Daily chart below.
Along the way I found some LSMA pumps, which leads me to the next strategy…
2. LSMA Breakouts.
Least Squares Moving Average is my favourite moving average and I incorporate it in one way or another with most of my scripts. To understand a LSMA breakout have a look at the LSMA 21 line on the chart below. As the candles cross the line it breaks out.
The default setting for the LSMA line on my COG indicator is 200. This is a great “zero” line and shows general trend. To catch LSMA breakouts I set the COG length to 6 and LSMA length to 6. The LSMA can also be set to 21 to find breakouts and LSMA Pumps (don’t worry, I’ll get to it soon).
Easy to find sweet entries on the BTC 1 hr chart.
3. What is a LSMA pump???
This is when a LSMA line pulls back and crosses another line for just a few bars before recrossing into a boom. Ive marked out a few LSMA pumps on the chart above. I like to use COG set at length of 6 and LSMA set to 21 for trading hourly to daily charts.
4. Trading Reversal Patterns.
If you are not familiar with reversal patterns such as double tops, double bottoms or head and shoulders then it would be a good idea to look into it. These are fundamentals of reading charts.
The COG is great for trading these patters too.
Above shows reversal patterns marked out.
5. Previous High/Low Strategy
This is another chart reading fundamental. This strategy can be used to find solid long and short entries. He is an example below using no indicators.
This example is a down trend that turns into an up trend. The first entry is a short found when price is unable to beat previous high. The second entry is a long. This is the confirmation of the up trend. Notice how the the low pivot point is higher than previous pivot. Next a short reveals itself again as price is unable to beat previous highs. The next long entry is made as up trend is reconfirmed by a low pivot forming higher than previous low pivot. Lastly another short as price is unable to beat previous high.
Now to apply this to the COG…
Above shows a nice long and short on the major pivots. The first trade is a long. As the major low pivot is made it does not break previous major pivot low and thus is a great long entry. Price then breaks out and forms a major high pivot point which does not break previous major pivot high making a great short entry.
The next example shows trading on continuations of trends.
A major Pivot is made. Long entries are found every time the the lows keep getting higher. Often these are LSMA pumps.
Above is another example of finding solid entries.
Here I have marked the entries on a 1 hour ETH chart using this strategy. It is great for swing trading.
6. Tuning your indicator.
Indicator settings should depend on what timeframe and what trades you are looking for. Its always a great idea to play with the settings and get the signals as accurate as possible.
COG lengths to try: 3-6, 9-14, 21-27, 50-55, 100, 200.
LSMA lengths to try: 2,6,9,11,19,21,25,27,32,50,100,150,200
In the indicator settings there is an option for smoothing. I usually have this turned on.
The centre of gravity oscillator is one of the most underrated indicators out. It gives solid signals and Im sure there is plenty more that I have not mentioned here. I am currently working on including all these signals into the indicator so you can set alerts or run bots. So far it looks like a Christmas tree with all those signals and needs work….
If you have any questions or ideas please drop a comment below. I am always keen to talk shop.
You can find my COG indicator here:
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Thanks for the support and happy trading!
