Rate of Change Analysis & Rate of Change Signals

Rate of Change measures price shifts over set periods. It compares the current candle to past ones. The gap shows the change.

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

The greater the fluctuations in prices, the more significant the variations in the ROC Indicator.

How to Use Rate of Change (ROC) Technical Indicator in Chart

XAU/USD Analysis and How to Generate Signals

Rate of Change technical indicator can be used to generate trading signals using a number of techniques, the most regular ones are:

Gold Cross-Over Signals

Bullish Signal - buy signal gets generated/derived when the ROC crosses above zero center line

Bearish alert: Sell when Rate of Change drops below zero. It crosses the center line.

ROC, Rate of Change Analysis in XAUUSD - ROC, ROC Indicator

Oversold/Overbought Levels:

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

Oversold means the lower the value, the more oversold XAUUSD is. Below the level signals a coming price rise.

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

XAUUSD Trend Line Breaks

XAUUSD Trend-lines can be made on the ROC technical indicator just like trend-lines are made on price charts. Because the ROC is a leading indicator, trend lines on the technical indicator will break before those on the price charts. A xauusd trendline break on the Rate of Change shows a potential bearish or bullish reversal signal forming.

Bearish reversal- ROC values/readings breaking above a downward trend line warns of a likely bullish market reversal.
Bearish reversal- ROC values/readings breaking below an upward trend-line warns of a likely bearish market reversal.

Divergence XAUUSD

ROC can be used to trade differences, & to find possible market trend change signals. There are four kinds of difference setups: regular bullish, regular bearish, hidden bullish & hidden bearish difference.

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