Rate of Change Metals Analysis & Rate of Change Trading Signals

Rate of Change, ROC indicator is used to calculate how much metals price has changed within a specified number of metals price periods. It calculates the difference between the current candlestick and the metals price of a selected number of previous candlesticks.

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

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

Metals Analysis & How to Generate Trading Signals

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

Metals Trading Crossover Trading Signals

Bullish Signal - buy metals signal is generated when the ROC crosses above the zero center line

Bearish Signal - sell metals signal is generated when the Rate of Change crosses below the zero center line.

Overbought/Oversold Levels:

Overbought - The higher the reading the more overbought metals is. Values that are above the overbought level imply that a metals price is overbought and there is a pending metals price correction

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

However, during strong trending markets the metals price will remain in the Overbought/Oversold Levels for a long time, and rather than the metals price reversing the metals price metals trend will continue for quite some time. It is therefore best to use the crossover signals as the official buy & sell metals trade signals.

Metal Trend-Line Breaks

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

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

Divergence Metals Trading

Rate of Change can be used to trade divergences, and to identify potential metals trend reversal metal signals. There are four types of divergences: classic bullish, classic bearish, hidden bullish & hidden bearish divergence.