Rate of Change CFD Technical Analysis and Rate of Change CFD Signals

Rate of Change indicator is used to calculate how much cfd price has changed within a specified number of cfd price periods. It calculates the difference between the current candlestick and the cfd price of a chosen 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 cfd prices the greater the changes in the ROC.

CFDs Technical Analysis and Generating CFD Signals

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

CFDs Trading Crossover Trading Signals

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

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

Overbought/Oversold Levels:

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

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

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

CFD Trend-Line Breaks

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

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

Divergence CFDs

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