Asked the secret of his investment success, legendary Wall Street tycoon Bernard Baruch replied: "by never buying at the bottom, nor selling at the top." Behind his witticism is a deadly serious point. Mainly because we want to look clever, we too often waste our time trying to call the exact highs and lows in the markets. Almost always, the result is that we needlessly make losses and miss out on gains.
Rather than trying to call the precise turn, then, what we ought to do is to enter as early as possible once a new trend has firmly established itself. But how can we systematically measure when this has happened? As it happens there is a tool that is designed specifically for this purpose: the Coppock Curve.
Invented back in the early 1960s, this clever indicator has regularly featured in the Investors Chronicle ever since, and has been successfully identifying new bull and bear markets ever since.
For example, it gave an official sell-signal just as the Wall Street Crash of 1929 was getting under way. It then signalled the end of that devastating collapse in 1932, lining investors up for super-charged recovery-gains over the coming years. It also screamed ‘buy’ just after the worst bear market of the post-war era in the mid-1974s, leading to one of the greatest annual performances ever. And it would have got you into the stock market as the 2009 rally was gathering steam.
