Center of Gravity indicator (COG) is a technical analysis oscillator with almost zero lag. COG indicator was introduced by John F Ehlers in 2002. It is a modern oscillator. The COG indicator is an oscillator which is smoothed to prevent undesirable whipsaws. The center of Gravity is characterized by the following essential features.
- The smoothing helps to clearly see price turning points.
- The indicator helps to see price reversals early.
- Fast and early actions can be taken due to zero lag effect.
- The Center of Gravity indicator formula is calculated from the total sum of prices over a period defined by the user.
The COG oscillator can also be used as a screener for screening a number of stocks according to desired conditions. Zerodha Kite charts can plot this cog indicator for traders.
How to set up Center of gravity indicator in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Center of Gravity and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected, the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
- By default, the COG indicator uses 10-day simple moving average and calculates from the closing price of a candle. These parameters can be customized.
COG indicator usage in intraday –
- The indicator shows price trend and trading opportunities.
- The picture above shows State Bank of India (SBIN) stock price movement with respect to COG.
- The chart shows 1 min. timeframe.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- In 1 minute chart, traders may find many whipsaws which will be eliminated if longer time frames are used and this indicator is used with a combination of other indicators.
- Create buy position when COG is at the bottom and exit/ short when COG is coming down from the top.
This technical indicator can be used to understand the market trend and as well as to create trading positions. Another major use for Center Of Gravity indicator can be in spotting the turning points using divergences.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.