Rate of Change Trading Analysis and Rate of Change Trading Signals

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

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

The greater the changes are in the prices the greater the changes in the ROC.

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

Trading Analysis and How to Generate Signals

Rate of Change indicator can be used to generate xauusd signals using a number of methods, the most common ones are:

Gold Trading Crossover Trade Signals

Bullish Signal - buy trade signal is 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 Technical Indicators

Over-bought/Oversold Levels:

Overbought - The higher the reading 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, and rather than the price reversing the market trend will continue for quite a while. It's therefore best to use the crossover signals as the official buy and 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 price charts. Because The Rate of Change is a leading indicator, the trendlines on the technical indicator will be broken before those on the price charts. A trend line break on the Rate of Change is an indication of a bullish or bearish reversal xauusd signal.

Bearish reversal- Rate of Change readings breaking above a downwards trend line warns of a likely bullish reversal.
Bearish reversal- Rate of Change readings breaking below an upward trend line warns of a likely bearish reversal.

Divergence Gold Trading

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

More Tutorials: