The ROC indicator is a technical analysis indicator belonging to the class of oscillators. It shows the rate of price change over a certain time period (n-periods). As you know, technical analysis of financial instruments is based on the fact that the market is always cyclical. At first glance, it may seem that the charts are unique and to some extent this is so, nevertheless, if uniqueness were really an integral and only sign of price changes, more than one indicator would not give profit to the trader.
Any trading instrument - currency pairs, stocks, options and futures - always change its value in a certain way. This is due to the nature of financial markets. There is always a struggle between sellers and buyers. Prices change a lot when certain ones prevail over rivals, and this in turn gives rise to patterns that are tracked and can be used with the help of technical analysis. We also recommend reading MACD Indicator.
The ROC indicator is a cunning oscillator, it quite accurately shows optimism / pessimism in the market. Like any other indicator of the family, it can be used in several ways: to analyze divergences, to track “breakouts” of signal levels directly on the indicator chart.
If there is an increase in the ROC oscillator, it means that the market is dominated by bulls, if the bears are falling. Accordingly, a strong incentive to trade may be a situation when, for example, there is a trend in the market, and the ROC indicator gives a signal in the same direction. You say this is how all oscillators work? Yes, you are right, but there is also a difference, and a significant one. Due to the nature (formula) of the rate of price change, the ROC indicator can also signal the strength of market participants. If we see a strong slope in the roc indicator chart, this indicates a stronger sentiment of the corresponding type of market participants. That is, when working with the ROC indicator, you can conduct analysis more accurately and comprehensively, which will allow you to earn more.
