Rate of Change Gold 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 xauusd price periods. It calculates the difference between the current candlestick and the xauusd price of a chosen number of previous candles.

The difference can be calculated using Points or Percents. Rate of Change moves in an oscillation manner, where it oscillates above and 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 xauusd prices the greater the changes in the ROC.

Gold Trading Analysis & How to Generate Trading 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 Trading Signals

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

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

Overbought/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 overbought and there is a pending xauusd 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 xauusd price rally.

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

XAUUSD Trend Line Breaks

Gold Trend lines can be drawn on ROC indicator just the same way trend lines can be drawn on xauusd price charts. Because The Rate of Change is a leading indicator, the trend lines on the indicator will be broken before those on the xauusd price charts. A gold trend-line break on the Rate of Change is an indication of a bullish or bearish reversal xauusd trading signal.

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

Divergence XAUUSD Trading

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