Also known under the COG abbreviation, center of gravity is a technical indicator utilized by experienced traders to predict and spot potential turning points. The indicator was established in 2002 by John Ehlers with the aim of not just spotting the turning points but also identifying them as soon as possible.
The center of gravity meaning refers to the idea of smooth and clear turning point identification handled without distraction. In this article, we are going to answer some of the baseline questions. What is center of gravity? How to calculate it and how to trade using the indicator?
Center of Gravity Meaning Explained
Center of gravity is one of the most commonly used and popular technical indicators applied by beginners and professionals. The main purpose of this instrument is to help traders anticipate potential price and trend moves as well as make a profit on price reversals as soon as they take place with no delays. The ability to react promptly to market changes and price actions is one of the most important benefits delivered by the indicator.
On the other hand, we should keep in mind the fact that the center of gravity is an oscillator. In other words. COG works best when it comes to range-bound markets. If the price keeps trending, the indicator will make no sense or can be even potentially dangerous to use.
For example: if compared with RSI, COG does not show oversold or overbought market conditions.