Center of Gravity (COG) is a VertexFX client VTL indicator that is an smoothed oscillator with essentially zero lag based on an article by John F. Ehlers. COG has essentially zero lag and enables clear identification of turning points. This indicator is the result of Ehler's study of adaptive filters.
The Center of Gravity indicator helps to identify the
main pivot points with no lag which is the principle advantage of this
indicator for both technical analysis and trading. The idea of calculating a
center of gravity appeared from the investigation of lags of different filters
with the finite impulse response (FIR) in accordance with the relative
amplitude of filter coefficients. SMA (Simple Moving Average) is a FIR-filter,
in which all coefficients have one and the same value. As a result the center
of gravity of SMA is an exact center of the filter. WMA (Weighted Moving
Average) is a FIR-filter, in which the last price change is weighted through
the filter length, and so on.
The values of weighting are coefficients of filters.
Coefficients of WMA filters can be presented as contours of a triangle. The
center of gravity is on the 1/3 of the triangle base length. Thus WMA gravity
center is shifted to the right with respect to the center of gravitation of SMA
of the same length, which gives us a smaller lag. For all examples with FIR
filters the sum of productions of coefficients and the price must be divided by
the sum of coefficients for preservation of original prices.
The crossing of signal lines serves as the indicator's
major signal:
If the red line crosses the blue one bottom up, the
indicator generates a buy signal.
In case the red line crosses the blue one to the downside, the indicator gives a sell signal.
In case the red line crosses the blue one to the downside, the indicator gives a sell signal.
Since the indicator was developed as less lagging
indicator, such signals can be successfully applied in trading without any
additional filter.
One more signal that can be generated by the Center of
Gravity computer indicator is the classical signal of divergence:
If the price has formed two new highs, (at that the
second one is higher than the first one) and the Center of Gravity indicator
did not show a new maximum, a divergence signal appears to warn of asset
selling.
If the price has formed two new lows (at that the first one is lower than the second one), while the Center of Gravity indicator did not produce a new maximum, a new convergence signal appears, contemplating an asset purchasing.
C:\ProgramData\VertexFX
Client Terminals\"Company name"\VTL10\Local VTL Scripts
Then
right click on the tree and select refresh or restart your client station and
you will find under VTL local scripts in your client terminal.
You
can check this video that talks about Center of Gravity Indicator: