The Rate of Change (ROC) is a momentum indicator that helps forex traders measure the speed of price movement and trend strength. In this guide, we’ll explore how ROC works, its advantages, and the best strategies to trade with it effectively.
The Rate of Change (ROC) is a momentum-based indicator that measures the percentage change in price over a selected period. ROC helps traders determine whether price momentum is accelerating or slowing down, making it useful for trend confirmation and reversals.
The ROC formula is:
ROC = [(Current Price – Price n Periods Ago) / Price n Periods Ago] × 100
Where:
ROC can confirm whether a trend has strong momentum:
Recommended Settings:
ROC can identify overextended market conditions:
Divergence between price and ROC can signal potential reversals:
Pairing ROC with a moving average (e.g., 50 EMA) improves trade confirmation:
✅ Pros:
❌ Cons:
The Rate of Change (ROC) is a valuable momentum indicator that helps traders assess trend strength, identify reversals, and measure price acceleration. When combined with other technical tools, ROC enhances trade accuracy and decision-making.
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