Introduction:
The rate of change indicator is one of the easiest and most effective oscillators, which shows the percentage change in prices from one period to another. Many traders have already rated this indicator in practice, however, its usefulness and accuracy does not need to be confirmed.
Description of indicator:
Indicator allows you to monitor the rate of change rate of price changes. The main advantage of this indicator is that the line of the indicator reaches the maximum or minimum before it makes the price chart, so you can determine in advance, or at least the top of the trend.
Crossing the line indicator mark of 1 means an increase in the growth rate of prices. If the indicator shows a reversal lines in high positions, that is evidence of the continuation of the trend, but not so hard as before, and the growth rate falls. If the indicator line crosses mark one down, it means increase in the rate of incidence.
Just this indicator is used to determine the optimism and pessimism of the market crowd to a particular financial instrument. When the indicator line above $ 1, it is a symbol of optimism, and if less than 1, respectively, then the market is pessimistic situation, often leading to further price Padania.
This indicator think trend, so the main signals to buy or sell acts intersection marks 1. If the line crosses this mark from the bottom up, this is a buy signal, the opposite signal to sell is the crossing of the mark one down.
Like all of the oscillators, the most powerful and reliable signal is divergence (the divergence read the previous articles of our site)
Excellent application indicator will calculate the end of the trend. If the line is an indicator showing an uptrend reversal from the top down, then this is evidence that trend is losing strength and will soon begin to fall. So it is in a downtrend, just turn to be below $ 1 and upward.
Disadvantages indicator:
The main drawback of this indicator is that it reacts to the price twice. He also highly sensitive to the price, since it follows the trend, so it is on the charts is not recommended for small halftime, in avoiding false alarms and loss of funds.
The bottom line:
The rate of change indicator, despite the false signals, very useful oscillator, but it must be used in accordance with the description above.