#1 Guide on how to properly use the Center of Gravity indicator on IQ Option


Center of Gravity indicator

John Ehlers designed a technical indicator in 2002. It is known as the Center of Gravity indicator and belongs to the group of oscillators. Ehlers states there are no delays and the smoothing effect allows to catch signals very early and clearly.

Key Takeaways🔑

The Center of Gravity indicator is a technical indicator designed by John Ehlers in 2002 for trading on price reversals.
It works best on ranging markets and its efficiency drops during price trends.
The COG indicator can be combined with the ADX indicator to improve trading decisions.

What is the Center of Gravity indicator?

The indicator from 2002 was designed for trading on the reversals of the price. It helps to predict future movements and works best on ranging markets. Its efficiency drops significantly during the moments of the price trend. In opposition to such oscillators like Stochastic or RSI, the COG does not include oversold or overbought zones.

Two lines create the COG indicator. A simple moving average is drawn along to serve as a line that produces signals to buy or sell.

How to attach the indicator to the chart on IQ Option

You will have to prepare your chart that is, choose the asset and the candlesticks type. Then, go to “Chart analysis” and choose “Momentum” under the “Indicators” tab. The Center of Gravity indicator will be visible in the list of indicators on the right side. Click on it and it will be attached to the chart.

How to find Center of Gravity indicator on IQ Option
How to find the Center of Gravity indicator on IQ Option

How to calculate the Center of Gravity indicator

Ehlers’ indicator is derived from the sum of prices collected during a given period. The Center of Gravity indicator formula looks as follows:

COG = sum of closing prices Pn x (n + 1) / sum of closing prices Pn

Fortunately for us, we have the IQ Option platform, which has this indicator built-in. There is no need to perform complicated calculations. The important thing is to understand how the indicator works and to interpret it correctly.

You can always adjust the values according to your needs, but the default settings are 10 and 3, where 10 is the period in which closing prices are collected and 3 is the period of COG simple moving average.

CoG indicator on AUDUSD chart
The COG indicator on the AUDUSD chart

What is Centre of Gravity in trading?

The principal rules are quite simple. As you can see, the calculations are not complicated. Basically, it is just a question of adding the closing prices during n recent periods. Then, there is a simple moving average with a period of 3. It gives clear signals to enter buy or sell positions whenever the lines cross each other.

Pros and Cons😃😔

+Produces signals with almost no delay, allowing for fast action
+Effective in predicting future price movements during ranging markets
Efficiency decreases during price trends
May require the use of additional indicators to identify suitable market conditions


COG Indicator Characteristics Details
Designed by John Ehlers
Type of Indicator Oscillator
Optimal Market Conditions Ranging markets
Primary Use Trading on price reversals
Key Signals Buy and sell signals generated when COG line intersects the SMA (signal line)

Buy signals

The COG gives a signal to buy when the indicator’s line crosses the SMA (signal line) from below and continues above it.

Sell signals

When the COG line intersects the SMA (signal line) from above and moves below it, you should go short.

Sell and buy areas according to Center of Gravity indicator
Sell and buy areas, according to the Center of Gravity indicator

Combination of the COG and the ADX

The COG can be successfully used when the market is ranging. You may want to use an extra indicator to identify a ranging market. I am talking about the ADX which stands for the Average Directional Movement Index.

You can use ADX filter to exclude strong trends
You can use the ADX filter to exclude strong trends

The crucial line for our purpose is the line of value 25. When the ADX oscillates above 25, the market is trending. When it moves below 25, it indicates the ranging market. Now, you should wait for the two lines of the COG to intersect before entering a position.

Final worlds

The advantage the COG indicator has is that it produces the signals almost without any delay. There is no lag between the COG and the price. Thanks to that you can act fast and enter a trade in just the right moment.

Mind that this indicator works best when used in ranging markets. To avoid opening a transaction during the trend, simply add the ADX indicator to your chart. Using both will safeguard your choices.

Enjoy trading!

Q&A🤔

    • Q:Who designed the Center of Gravity (COG) indicator?
    • A:John Ehlers designed the COG indicator in 2002.
    • Q:What type of market is the COG indicator most effective in?
    • A:The COG indicator works best in ranging markets.
    • Q:What are the key signals generated by the COG indicator?
  • A:Buy and sell signals are generated when the COG line intersects the SMA (signal line) from below or above, respectively.
  • Q:How can the COG indicator be combined with other indicators for improved trading decisions?
  • A:It can be combined with the ADX indicator to identify ranging market conditions and to exclude strong trends.
  • Q:Is the COG indicator suitable for trending markets?
  • A:No, the COG indicator’s efficiency decreases during price trends, and it is best suited for ranging markets.

GENERAL RISK WARNING

The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.
Kindly note that this article does not provide any investment advice. The information presented regarding past events or potential future developments is solely an opinion and cannot be guaranteed as factual, including the provided examples. We caution readers accordingly.

How useful was this post?

Click on a star to rate it!

Average rating 4.8 / 5. Vote count: 16

No votes so far! Be the first to rate this post.

As you found this post useful...

Follow us on social media!

We are sorry that this post was not useful for you!

Let us improve this post!

Tell us how we can improve this post?

Bart Bregman

Author / IQ Option expert: "My name is Bart Bregman, I have 9 years of full-time professional trading experience. I've been trading with IQ Option for more than 7 years, mainly on the shorter time frames doing technical analyses, and have many experience with Binary Options, CFDs, Options, and Crypto trading. There is no such thing as a bad trade! As a digital nomad trader, I'm mostly traveling all over the world. Follow my journey on Instagram at https://www.instagram.com/bart_bregman/. "

You may also like

Learn Trading Without Any Risk – Free $10,000 Demo Accounts Available!
This is default text for notification bar