ROC indicator application rules and detailed explanation of buying and selling signals

Combined with the characteristics of ROC, we can follow the following application rules for reasonable operation. To use ROC more effectively, here is another auxiliary indicator - ROCAVG (i.e. the moving average of ROC).

(1) From the perspective of the numerical change of ROC

When the ROC falls below the 0 axis from the top down, this is usually seen as a sell signal. Conversely, when the ROC breaks above the 0 axis from the bottom up, it constitutes a buy signal. This law is based on the core property of ROCs that reflects the speed of stock price movement.

(2) From the perspective of the relative relationship between ROC and ROCAVG

ROCAVG is the moving average of ROC, and the relationship between the two is similar to that between the stock price and its moving average. Therefore, when ROC crosses ROCAVG up and ROC is in a positive range, it is a buy signal. Similarly, when ROC crosses ROCAVG down and ROC is in a negative range, it is a sell signal.

(3) From the perspective of the divergence between ROC and stock price

The ROC curve has the property of being ahead of the stock price movement, so it can be judged according to the following rules. If the ROC curve has two successive declining peaks from a high, while the stock price has reached a new high in the same period, this forms a top deviation and is a sell signal. Conversely, the ROC curve forms two successive rising troughs from a low to a new low, which is a bottom deviation and a buy signal.

The ROC (Price Rate of Change) indicator is presented as a ratio by comparing today's price with the price of N days ago. This indicator was introduced by Gerald Apple and Fred Hitschler in the book Stock Market Tra Systems, and 12-day and 25-day cycles are usually used to achieve better analytical results.

Principles of buying and selling:

1. ROC has the application principle of overbought and oversold.

2. Due to the different price ratios of individual stocks, the range of overbought and oversold stocks will vary slightly, but it usually fluctuates between plus or minus 6.5.

3. When the ROC hits the oversold area, you can consider buying; when the ROC hits the overbought area, you should consider selling. When using such indicators to make judgments, combine regular platforms such asTickmillThe market data provided can help investors grasp the market rhythm more rationally.

4. There may also be a divergence signal between ROC and stock price, which can be used as an important reference.