How to Use the COG Indicator to Detect Upcoming Price Swings

10:23, 14 Sep 2020

The Center of Gravity indicator, shortly known as the COG indicator, is a feature that helps traders determine those support and resistance levels of the price. The support level shows how strong the buyers’ position is, that is, how the price is increasing; the resistance level shows the strength of the sellers’ position - how well the price is decreasing.

Plotted as an oscillator, the COG indicator tries to provide signals for future price swings. For that reason, it is considered a leading indicator, meaning that it helps people predict future prices, instead of observing the past movements and confirming a certain trend or a pattern.

When using the Center of Gravity indicator, traders will see two lines in the indicator chart: one is a COG line and the other is the COG Trigger or a signal line - a simple moving average that helps the indicator generate signals. When the two lines cross, traders get to buy or sell signals: if the COG line crosses above the signal line (a support level), they will get a buy signal; if the COG line crosses below the signal line (a resistance level), they will get a sell signal.

The Center of Gravity indicator newbie guide

In Forex, as well as other trading markets, a price is always moving up and down, sometimes chaotically, sometimes in a certain direction. When a price movement has no defined trend, it’s support and resistance levels quickly interchange between each other. There are multiple ways that the Center Gravity indicator proves to be helpful.

It’s short
It’s comprehensive
It’s freely available

The Center of Gravity indicator, also known as the COD indicator in short, is a useful feature that enables traders to look into the concurrent price fluctuations and try to predict the upcoming ones. Developed by John Ehlers, the COD indicator is one of the more recent technical indicators in the field.

According to the main function of the Center of Gravity indicator explained by John Ehlers himself, traders who use it will be able to closely speculate the upcoming price change of the asset. Ehlers noted that not only is the COG a leading indicator, but it also has virtually no lag whatsoever, which is not something we will test in this article.

The difference between leading and lagging indicators

What we are interested in is the difference between leading and lagging indicators. As already mentioned earlier, the COG is a leading indicator, meaning it can help traders make some predictions about future price movements. Usually, such indicators are plotted as oscillators in the chart, which means the indicator moves within a certain scale in order to give a buy or sell signal.

Unlike leading indicators, lagging indicators only assess the price movements that have already occurred. Therefore, traders use them in order to confirm a certain trend, which is also a very important factor in trading.

How to use Center of Gravity indicator in real life?

So, now that we have the COG indicator explained, let’s say what it actually does. To put it shortly, this indicator measures the support and resistance levels in price movements. As for the support and resistance levels themselves, here’s what they mean:

Support occurs when the downtrend starts to slow down and even pause. That’s because traders tend to have a high demand for an asset when its price is very low, therefore generating a support level at the lowest point of a downtrend

Resistance occurs when the uptrend starts to pause or slow down. As the price has reached its peak, many traders want to start selling their assets, thus forming a resistance level to the uptrend

By using the COG indicator, traders can identify those support and resistance levels and have a more or less clear idea when the price starts moving in a different direction. In order to do so, the platform, whether it is MT4, cTrader, or anything else, uses a complex Center of Gravity indicator formula that finally plots a COG line in the chart. Alongside it, the indicator also uses a simple moving average line that is called a signal line or a COG Trigger.

By looking at the way these two lines intersect each other, traders can get the idea of when the buyers’ or sellers’ interests are strengthening. For example, when the COG line crosses above the signal line, it means that the actual price has received support and started on an upward trend. Therefore, it may be a good idea to buy an asset.

Conversely, if the COG line crosses below the signal line, it means that the asset price has met resistance and started declining. Therefore, selling an asset could be a good idea. One thing to keep in mind when using these COD indicator settings is that it works only if the market has no defined trend and the support and resistance levels interchange between each other. That’s because, during a trend, the price will likely continue in the same direction for a while, whereas the COD indicator is applied to quickly change prices.

Center of Gravity indicator download and install on your platform

When downloading MetaTrader trading software, it usually doesn’t come with the pre-installed Center of Gravity indicator. That’s why traders need to find a certain version of the COG on the internet and install it on the platform. A quick disclaimer: the internet is full of both Forex Center of Gravity indicator MT4 and the Center of Gravity indicator MT5 installation files.
COG indicator MT4 download

When you find a specific version of the free Center of Gravity indicator that you are happy with, you need to download the file on your computer. If the file is in the archive, you first need to extract it and then go ahead and paste it in the appropriate folder, which is located in the original installation partition. In the MetaTrader 4/5 folder, you will find the MQL4/5; after you open it, you’ll find another folder called Indicators. That’s where you need to copy the COG indicator file.

After the installation is complete, you will have to restart your trading platform. And that’s it: you will find your new Center of Gravity indicator in the Navigation panel under the Indicators list.

COG indicator guide for traders - Key takeaways

When trading Forex, stocks, or other securities, one of the main aspects of the price movement traders want to find out is support and resistance levels - the areas and moments where/when the buyers’ and sellers’ interests are at their strongest. To do that, they use the Center of Gravity (COG) indicator.

In this COG indicator tutorial, we examined what the COG indicator is and how it works. Using the COG line and the signal line, also known as the COG Trigger, and by observing their intersection, traders can find out when the price is starting to increase (get support) or decrease (meet resistance). These signals then help them make more conscious trading decisions.

We also made it very clear that the COG indicator becomes useful for the market conditions with no definitive trends. For trendy markets, there are other technical indicators such as ADX, RSI, etc. Finally, we explained how the COG indicator MT4 download is done and that it takes very few steps to have it on your platform.

FAQ

1.Where can I find the Center of Gravity indicator MT4 download file and how to install it?

As noted in the article above, there's no Centre of Gravity indicator MT4 platform offers on default. That’s why you need to download it yourself and then install it on the platform, which is quite easy for anyone.

First, you need to locate the actual download file on the internet. By just searching the “COG indicator download”, Google will bring out lots of different sources for different indicator versions. Once you find the most suitable COG version for your trading preferences, you hit download.

Then you need to take the downloaded file into the correct MT4 folder. For that, you need to go to the disk partition where you originally installed the software, open the MetaTrader 4 folder, go to the MQL4 folder, and paste the COG file in the Indicators folder. After that, you just need to restart the platform and you will have the COG indicator successfully installed on MT4

2.How to trade with the Center of Gravity indicator?

The gravity position indicators such as the COG are often plotted as an oscillator in the chart. This means that it contains a graph with a line that quickly moves up and down. Specifically, the COG indicator contains two lines - a COG line and a signal line (COG Trigger).

These two lines move against each other and when they intersect, the indicator generates a signal. Here’s how it goes:

If the COG line crosses above the signal line, it means that the actual price of an asset has started to increase. Therefore, the indicator gives out a buy signal
If the COG line crosses below the signal line, the asset price has started to decrease. Therefore, the indicator generates a sell signal

These two conditions derive from the calculation of the COG Indicator, which has a complex formula to explain here. We only need to know that this indicator and the above-mentioned configurations only work if the market doesn’t have a definitive trend.

3.What does it mean that the Center of Gravity is a leading indicator?

According to John Ehlers, a creator of the Center of Gravity indicator, the COG has little to no lag at all. But what does that mean? To understand this, you need to know what the difference between lagging and leading indicators is.

Lagging indicators are those that observe the already-occurred price movements, therefore, their signals are generated after a certain move. Traders usually use them to confirm a trend and make trading decisions in the same direction of that trend.

Leading indicators, in contrast, enable traders to make certain predictions about future price movements. Such indicators, like the COG, take a form of oscillators with their value fluctuating up and down within a graph. When Ehlers claims that the COG has little to no lag, he means that the buy and sell signals are generated live as the price is moving. Therefore, traders don’t lose much time to make decisions.