Rate of Change Trading Analysis and Rate of Change Signals

Rate of Change, ROC technical indicator is used to calculate how much xauusd price has changed within a specified number of price periods. It calculates the difference between the ruling candlestick and the price of a chosen number of prior candles.

The difference can be measured and calculated using Points or Percentages. Rate of Change moves in an oscillation sort of manner, where it oscillates above & below a zero center line level. Levels above zero are bullish while those below the zero center-line level are bearish.

The higher the changes are in prices the greater the changes in the Rate of Change Indicator.

How Do I Add Rate of Change (ROC) Indicator in Chart?

Trading Analysis and How to Generate Trading Signals

Rate of Change can be used to generate xauusd signals using a No. of methods, the most common ones are:

Gold Crossover Signals

Bullish Signal - buy signal is derived & generated when ROC crosses above zero centerline

Bearish Signal - sell signal is generated when Rate of Change crosses below zero centerline.

ROC, Rate of Change Technical Indicators - ROC, ROC Indicators

Over-bought/Oversold Levels:

Over-bought - The higher the value the more overbought gold is. Values that are above the overbought level imply that a xauusd price is over-bought and there is a pending price correction

Oversold - The lower the reading the more oversold gold is. Values below the oversold level imply that gold is oversold and there is a pending price rally.

However, during strong trending markets the price will remain in the Overbought/Oversold Levels for a long time, rather than price reversing the market trend will continue for quite a while. It's thence best to use the crossover signals as the official buy & sell signals.

Trend-Line Breaks

Trend lines can be drawn on ROC trading indicator just the same way trend lines can be drawn on xauusd gold price charts. Because The Rate of Change is a leading indicator, the trend lines on the technical technical indicator will be broken before those on price charts. A trend line break on the Rate of Change is an indication of a bullish or bearish reversal gold signal.

Bearish reversal- Rate of Change readings breaking above a downward trend line warns of a likely bullish market reversal.
Bearish reversal- Rate of Change readings breaking below an upwards trendline warns of a likely bearish reversal.

Divergence XAUUSD Trading

Rate of Change can be used to trade divergences, and to identify the potential trend reversal setups. There are 4 types of divergences: classic bullish, classic bearish, hidden bullish & hidden bearish divergence.

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