How to use the Rate of Change indicator 📊
The Rate of Change (ROC) is a momentum-based technical indicator that measures the percentage change in price between the current price and the price a certain number of periods ago.
The value of the indicator can be above or below zero as seen in the picture above. How to use the ROC in practice 👇
📈 A positive ROC value indicates that prices are increasing and may suggest a bullish trend.
📉 A negative ROC value signals that prices are decreasing and may suggest a bearish trend.
🔍 Extremely high values can indicate overbought conditions, potentially leading to a pullback, whereas extremely low values may signal oversold conditions, potentially leading to a bounce.
👀 Watch for divergences between the ROC and price. If the price hits new highs but the ROC fails to reach them, it may indicate weakening momentum and a potential reversal.
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