Swing Traders

The Center of Gravity is an oscillator. Stock prices or indices pivot around a center, hence the indicator's name - center of gravity.

The price can fluctuate abruptly but will return - soon or late - to its center line. In the graph below the center of gravity is represented in blue.

When the price move in the red zone, the stock is overbought and a downward corrective move is to be expected.

When moving into the green line, the stock is oversold and an upturn is probable.

Swing traders, using the Center of Gravity indicator, also check the signal with the Center of Gravity Timing indicator, below in the graph above.

3 zones are to be considered:

• The Neutral zone, in the middle zone between the red and the green line. When the Timing indicator is in this zone, one should rather not open any positions. Be patient and wait.
• The Red zone above, bordered by the 2 red lines and the Green zone below, bordered by the 2 green lines are exit zones.  If a trader has a long position and the Timing indicator goes into the red zone, the position is to be sold. If the trader is short on a stock and the Timing indicator goes into the green zone, the short position can be closed.
•  The Extreme zones are the zones above the upper red line or below the lower green line. These zones are good entry points. Is the Timing indicator above the upper red line, then opening a short position is to be considered. Should the Timing indicator be below the lower green zone, then the stock is to be bought.

Now, why not use the Dynamic RSI, the Center of Gravity and Timing together?

This approach provides extremely good trading signals. Here a recap:

Go long when:

• The Dynamic RSI leaves and reenters the lower band;
• The Center of Gravity is in the green zone;
• The Timing is below the green zone

And go short when: 

• The Dynamic RSI leaves and reenters the upper band;
• The Center of Gravity is in the red zone;
• The Timing is above the red zone

A few examples:

WTI Crude Oil

 Invensys

DAX index

BHP Billiton