(1)In your own words, give an explanation of the ROC indicator with an example of how to calculate its value?And comment on the result obtained.
Rate of Change (ROC) Indicator is a momentum based technical indicator which represents the percentage change in price between the Current Price and Price of particular Periods ago.
ROC Indicator helps traders in identifying the upcoming trend, strength of current or ongoing trend or upcoming reversal or correction in the market or continuation of the ongoing trend.
This Indicator is a oscillator type line which moves along '0' line and It moves in Positive (+) area when the Price is in upward direction and It moves in Negative (-) area when the Price is in downward direction.
We can find some signs with the help of ROC Indicator which are Overbought and Oversold condition in the Market.
We can find Crossovers in the market so that We will be able to determine the inversion of the ongoing trend.
There is a particular formula for calculating the Value of ROC Indicator. For this, We have to use some Values which are -
Current Price and Price of the particular asset "N" Periods ago.
Let's suppose I have taken values of Binance Coin and I am calculating ROC Value for 12 Periods.
Current Price - $456
Price of 12 Periods ago - $480
ROC = (456-480)/480 × 100
ROC = -24/480 × 100
ROC = -0.05 × 100
ROC = -5%
From this Calculation, We can determine that The Value of BNB has decreased over last 12 Periods by 5% and has decreased from $480 to $456.
(2)Demonstrate how to add the indicator to the chart on a platform other than the tradingview, highlighting how to modify the settings of the period(best setting).(screenshot required)
I will be adding ROC Indicator on Investing.com. For adding this Indicator, First Click on Charts on upper right corner.
After Clicking on charts, there will be shown various types of Charts. So, Click on Cryptocurrency Charts.
Then, Charts will be opened on this site. For adding Indicator, Click on Indicators sign on upper right corner of the Chart.
Then, Search ROC on Indicators and then Click on Rate of Change Indicator as shown in the below image.
And then, ROC Indicator will be successfully added to the Chart on Investing.com.
For It's Configuration, Click on Settings of ROC Indicator.
Then, First Option will be of Input in which You can set the Length of this Indicator as per your choice. The default length of this Indicator is 9.
After that, Click on Style and then You can set the colour of ROC Indicator and Zero Line.
Well, There are most used length by maximum traders is 12 or 25. The best settings if this Indicator depends on the trading strategy like Short Term or Long Term.
For Short Term, It is better to use 12 length Period as It will be best for Short term trading and For Long Term, It is better to use25 length period.
(3)What is the ROC trend confirmation strategy? And what are the signals that detect a trend reversal? (Screenshot required)
ROC Indicator shows the % change in the price of a particular crypto asset for a particular periods . ROC Indicator can also confirm the upcoming trend.
When this Indicator crosses '0' line from below to above direction straightaway, then it is a sign of Bullish move of the Price.
When the Indicator crosses '0' line from above to below direction straightaway, then it will be a sign of Bearish move of the Price.
For an Uptrend, It confirms the Uptrend by moving above the 0 line from below direction following by upward or positive values of the price, and hence It will confirm the Uptrend.
For a Downtrend, It confirms the downtrend by moving below the 0 line from above direction following by downward or negative values of the price, and hence It will confirm the Downtrend.
Signals that detect a Trend Reversal
We can detect a trend Reversal by using ROC Indicator from Overbought conditions and Oversold conditions.
When the Price starts coming from Overbought condition and starts crossing the midpoint (0) line from above to below direction then, We can say that It is about to make a trend reversal which will be Downtrend Reversal.
When the Price starts coming from Oversold condition or Overbought condition and starts crossing the midpoint (0) line from below to above direction then, We can say that It is about to make a trend reversal which will be Uptrend Reversal.
(4)What is the indicator’s role in determining buy and sell decicions and identifying signals of overbought and oversold؟(screenshot required)
We can clearly get Buy And Sell Signals using ROC Indicator by looking at the midpoint (0) line and looking at the crossover of the ROC Indicator.
For Buy Signal, Look at the Indicator line and When It crosses the midpoint (0) line moving straight from below to above direction, then It will be consider as a Buy Signal.
From above image, You can see that When the line crossing the midpoint line from below to above, then I considered that point as Buy Point and from that Point, You can clearly see that there is bullish move started or price moved in upward direction.
For Sell Signal, When the Indicator line crosses the midpoint (0) line moving straight from above to below direction, then that point will be considered as a Sell Signal.
From above image, You can see that When the line crossing the midpoint line from above to below direction, then I considered that point as Sell Point and from that Point, You can clearly see that there is bearish move started or price moved in downward direction.
Overbought Condition represents that in that condition, there is over buying and hence, there will be a downward move and Oversold Condition represents that in that condition, there is over solding and hence, there will be a upward move.
We can consider +/- 3 or +/- 4 or more as Overbought and Oversold conditions respectively using ROC Indicator. I will take +/-4 level as Overbought condition and Oversold condition.
As When the Line is in +4 level then it is said to be in Overbought condition and When It sharply crosses +4 level from above to below, then We can consider that point as Sell Point as there will be downward or Bearish move of the Price at that Point.
When the Line is in -4 level then it is said to be in Oversold condition and When It sharply crosses -4 level from below to above, then We can consider that point as Buy Point as there will be upward or Bullish move of the Price at that Point.
(5)How to trade with divergence between the ROC and the price line? Does this trading strategy produce false signals?(screenshot required)
We can determine the Divergence when there is a particular divergence in the indicator but there is opposite move in the direction of Price like Bullish Divergence in Indicator but Price moving in downward direction.
When there is Bullish Divergence in the ROC Indicator i.e. the ROC Indicator line is moving upward and the price moving in opposite direction i.e. price moving in downward direction, then We can say that It is a Bullish Divergence of ROC Indicator.
When there is Bearish Divergence in the ROC Indicator i.e. ROC Indicator line is moving downwards and the price moving in opposite direction i.e. price moving in downward direction, then We can say that It is a Bullish Divergence of ROC Indicator.
As We all know that None of the Indicator is 100% accurate and Hence, ROC Indicator can also produce False Signals in case of Divergence.
We can filter out these False Signals by using some other technical indicators alongwith ROC Indicator like EMA, RSI. It will help in filter out these False signals.
(6)How to Identify and Confirm Breakouts using ROC indicator?(screenshot required)
A Breakout is made whenever there is a sudden price movement or that can be sudden volume change in that particular asset which can result in the Breakout.
From ROC Indicator, When this Indicator is moving around zero line, then that are can be considered as accumulation zone or consolidation zone. When this Indicator makes a good movement away from zero line, then there can be a possibility of Breakout.
As You can see in the above images, That ROC Indicator moving around Zero line for sometime and that region will be considered as accumulation zone.
When this Indicator started moving away from that zero line, then there can be possible Breakout formed at that point.
The Point when the Indicator started moving away from Zero line, then that point will be considered as Breakout Point as you can see in above images.
(7)Review the chart of any crypto pair and present the various signals giving by ROC trading strategy. (Screenshot required)
I will be reviewing SXP/USD chart for technical analysis using ROC Indicator. I'll show you a chart in which there will be various signals using ROC Indicator.
Firstly, I have marked the point where this Indicator has crossed 0 line from below to above direction which means there will be upward movement of the price and You can see that After crossing 0 line, there is Uptrend started.
Secondly, I have marked a Bearish Divergence and at the same time, there is Bullish movement in the price which means after sometime, there will be downward movement.
Thirdly, I have marked Consolidation zone or Accumulation zone which means the Indicator is moving around Zero Line and When It started moving away from zero line, then there is Breakout made at that point as I have marked Breakout in the chart.
At that Point, I have also marked Buy Point as the Indicator is crossing Zero line in the above direction and after that, Uptrend is started.
ROC Indicator is definitely a best indicator for identifying the upcoming trend, strength of the trend and continuation of the trend.
There are many Indicators available in the Trading Market and The Uses of ROC Indicator is definitely very beneficial for trader. We can take great advantage using this indicator.
Thanks Professor @kouba01 for this much informative lecture. I am glad to participate in your lecture.
All Chart Images are taken from TradingView except mentioned.