Center of Gravity indicator is a channel indicator, which displays a channel consisting of 5 lines on the price chart of a currency pair:
- Blue Line - the midline of the canal;
- Green lines - internal boundaries of the channel;
- Yellow lines - the outer boundaries of the channel.
The distance between the inner and outer boundaries is in direct correlation with the level of volatility - the greater the volatility, the smaller the gap between the boundaries.
Using the Center of Gravity indicator
The Center of Gravity indicator is used in channel strategies and implies the use of two types of entry points:
- Rebound from the border of the channel
If the price rebounds from the lower boundary of the channel, we open a buy position, with the first take profit set on the middle line of the channel, and the second Take Profit - at the upper border of the channel. Stop-loss is set below the border of the channel, at a distance corresponding to the gap between the green and yellow lines.
- Price crossing the center line of the channel
The signal for opening a long position is the price crossing the middle line of the channel from bottom to top, to open a short position - from top to bottom. Take Profit and stop loss are set at the level of the internal borders of the channel.
ForTrader.org experts point out that the disadvantage of Center of Gravity indicator is channel redrawing, which is especially noticeable on lower timeframes. To filter false signals it is also recommended to use oscillators operating with levels overbought и oversold.