Rate of Change XAUUSD Technical Analysis & Rate of Change XAUUSD Signals
Rate of Change indicator is used to calculate how much gold price has changed within a specified number of gold price periods. It calculates the difference between the current candlestick and the gold 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 gold prices the greater the changes in the ROC.
Gold Technical Analysis and How to Generate Trading Signals
Rate of Change indicator can be used to generate gold signals using a number of methods, the most common ones are:
Gold Trading Crossover Trading Signals
Bullish Signal - buy trading signal is generated when the ROC crosses above zero center line
Bearish Signal - sell signal is generated when the Rate of Change crosses below the zero center line.
Oversold/Overbought Levels:
Overbought - The higher the reading the more overbought a xauusd is. Values that are above the overbought level imply that a gold price is overbought and there is a pending gold price correction
Oversold - The lower the reading the more oversold a xauusd is. Values below the oversold level imply that a xauusd is oversold and there is a pending gold price rally.
However, during strong trending markets the gold price will remain in the Oversold/Overbought Levels for a long time, and rather than the gold price reversing the gold price trend will continue for quite some time. It is therefore best to use the crossover signals as the official buy and sell signals.
XAUUSD Trend-Line Breaks
XAUUSD Trend lines can be drawn on ROC indicator just the same way trend lines can be drawn on gold price charts. Because The Rate of Change is a leading indicator, the trend lines on the indicator will be broken before those on the gold price charts. A xauusd trendline break on the Rate of Change is an indication of a bullish or bearish reversal gold trading signal.
- Bearish reversal- Rate of Change readings breaking above a downward xauusd trend-line warns of a likely bullish reversal.
- Bearish reversal- Rate of Change readings breaking below an upwards xauusd trend-line warns of a likely bearish reversal.
Divergence Gold
Rate of Change can be used to trade divergences, and to identify potential xauusd trend reversal signals. There are four types of divergences: classic bullish, classic bearish, hidden bullish and hidden bearish divergence.
