Binary options trading might look as simple as cutting a piece of cake. However, this thought about binary options is not entirely true. Binary options trading involves a lot of work. From building the right trading strategies to making informed decisions, trading involves plenty of tasks.
Trading indicators like the rate of change make these tasks simpler for the traders. With this technical indicator, they can plan trading moves in the best way possible.

Key facts:
- The Rate of Change (ROC) indicator measures the percentage change in price over a specific period, helping traders to assess market momentum and make informed decisions.
- ROC is plotted on a graph where a positive value indicates an upward price movement and a negative value suggests a downward trend, aiding in identifying overbought or oversold conditions.
- While ROC is useful, it is not sufficient on its own for making trading decisions; it is best used in conjunction with other indicators and strategies for more accurate binary options trading.
What is a rate of change trading indicator?
Like other momentum indicators, the rate of change helps traders to know the market momentum of any financial asset. Information such as the highs and lows of an asset, the direction of price movement, and several other things are known with its use.
Good to know!
The rate of change measures the percentage change in the price of an asset. Hence, it shows the percentage difference between an asset’s current price and its past prices.
Traders can choose any time frame they want to know the results. Ideally, many people choose 14 days to get a precise analysis.
It is easily possible to calculate ROC by using a simple formula.
Like other trading indicators, it is a momentum indicator plotted on the graph. The plotting starts from zero. When the underlying asset’s price moves in a positive direction, i.e., upward, you will see the rate of change indicator moving upward. On the contrary, if the trading indicator dives down negatively, it will indicate that an asset is going down in value.
There are several reasons why traders choose the rate of change trading indicator:
- It is one of the best momentum trading indicators.
- Knowing the market momentum gets easier with the rate of change trading indicator.
- The rate of change also allows traders to know the percentage difference, which is otherwise impossible.
- A comparison between the asset’s current price and past prices becomes easier.
- ROC is by far the best trading indicator to know the market divergences. It also tells you the overbought and oversold market conditions.
- This indicator is also an ideal one to know the centerline crossovers.
A trader who knows how to use the ROC trading indicator can excel in binary options trading. ROC is the most common among beginner and professional traders. After all, traders like to know the percentage increase in the asset’s price.
Online trading platforms offer a majority of technical indicators to traders. For instance, Pocket Option is a leading provider of all technical indicators, offering a great overview and support for those who want to succeed in the market. Obviously, the rate of change is also one of the many trading indicators available on the platform.
How to interpret the rate of change trading indicator?
The correct interpretation of any trading indicator is crucial to achieving great results.
- Often, traders might see something different happening on the ROC indicator. Sometimes, the price of an asset might go up, but the ROC might still move down. In such a situation, a trader can assume a bearish market trend.
- The underlying asset is in for a downward trend and a downside price movement. Just like this, the opposite is also true!
- Sometimes, traders might find the ROC moving upward when the price declines. This situation signals a bullish market trend, and the market might turn the other way.
But, there is one drawback of this trading indicator. Even though you can use it to formulate the best binary options strategy, it might experience whipsaws. Therefore, most traders use ROC to alert themselves of the trend reversals that might happen at any time. Generating these alert signals just in time helps traders from making losses.
Pro tip: It is best to use the rate of change trading indicator for generating alert signals. But if you want to formulate your binary options trading strategies using this, you might have to pick two or more indicators. This practice would bring more accuracy to your binary options trading strategies and save you from losses.
How to calculate the ROC indicator?
To use ROC, traders should know how to calculate it. This trading indicator is the best to know the overbought and oversold conditions.
Traders can easily calculate ROC by using a simple formula.
ROC = (Closing price now – closing price before the ‘n’ period) / closing price before the ‘n’ period x 100
Any trader must first choose the n value to calculate the underlying asset’s ROC. If you are into short-term binary options trading, you can choose a small number of days. However, its also possible to follow vice versa if you are a long-term binary options trader. Here, the ‘n’ value helps you you determine the asset’s value before the current period.
Good to know:
- Traders picking smaller n values will find that ROC responds quickly.
- However, ROC’s reaction is a little slow when the value of n is larger.
- The results are much more accurate when you pick a higher value.
To calculate ROC, traders only need to find the following information:
- Choose the period ‘n’ for which you want ROC to show results.
- Now, you can dig into the underlying asset’s most recent price.
- After this, traders must find the closing price of the underlying assets during the ‘n’ period.
- Now, you can easily put these three underlying asset prices into the ROC formula.
- This step will find you the ROC value. You can change the values according to the ‘n’ periods you consider.
How to use the ROC trading indicator for binary options?
Traders wishing to make profits with binary options trading can easily use ROC. They need to know the ROC formula, and they can make well-informed trading decisions.
Here are some steps that will help binary options traders use ROC for technical analysis:
- First, a trader must have a binary options trading account to use the ROC trading indicator. Getting a live trading account is a child’s play these days. Platforms such as Quotex.com offer hassle-free live account opening possibilities for traders.
- After choosing a binary options broker, traders can click on the signup option. It will direct them to the page where they can enter their information. Once the information gets verified by the broker, you can initiate trading.
- However, first, you would have to fund your account with the minimum deposit amount. Now, you can look for the underlying assets and the market on the online trading platform.
- A trader must choose only those assets that are profitable. Using ROC will help traders find it out.
- You can choose a couple of assets and use ROC on them. And then, you can consider choosing the asset with an upward trend on the ROC.
- However, a trader should also consider other factors, such as divergences. Considering all these factors will help you judge the most profitable asset and pick them for trading.
- The best practice for any trader would be combining a couple of other technical indicators with ROC.
Good to know:
You can combine ROC with other technical indicators for the most accurate binary options technical analysis. Using ROC on its own may not provide the necessary results. Therefore, it is helpful for you to pair it with other trading indicators.
Good to know!
- Traders can combine ROC with other technical indicators for the most accurate binary options technical analysis. Using ROC individually might not deliver the needed results. Therefore, a trader must combine it with trading indicators.
You can also combine a couple of other binary options trading strategies with ROC. Let us tell you binary options strategies that fit with the ROC trading indicator.
Binary Options strategies with ROC indicator
Here are some binary options trading strategies you can use with ROC next time you trade.
- News trading strategy
It does not matter which trading strategy is your favorite. There are a few binary options trading strategies that you can’t ignore. News trading strategy is that strategy. Keeping track of news keeps you updated with the market happenings.
News has an unsurmountable potential to affect an underlying asset‘s price. Even if an asset is reaching its peak price and performing well in the market, it can still come down. It depends on the news. If there is one negative news about an underlying asset in the news, it can be trouble. Therefore, a trader should not compromise his binary options trade by ignoring the news.
Combining ROC with the news trading strategy comes as a cherry on top. With this indicator, traders can depict the percentage change in an asset’s price over a couple of days. Thus, undoubtedly, these two trading strategies go well with each other.
- Trend analysis
Another crucial trading strategy for binary options traders is trend analysis. Going for the trends is the best of all binary options trading strategies. It is because traders know the direction in which the asset’s price moves.
Since binary options are a risky investment for any trader, they should know the trend. Knowing the trend will help traders make profitable binary options trades. Trends become apparent with technical analysis. Traders can also use ROC to know the upward or downward trend in the market.
Once you know the trends, you can easily plan binary options trade.
- Using other trading indicators with ROC
Trading platforms like Quotex.com (find our review & test of Quotex here) offer several other trading indicators to traders. For the most accurate trading decisions, traders should combine two or more trading indicators. If one trading indicator tells you the market momentum, the other can tell you the trend reversals. Some trading indicator combinations might be perfect for detecting the resistance and support levels in the market.
The most common trading indicators you can combine with the rate of change include the following:
- Awesome Oscillator
- Stochastic Oscillator
- Bollinger Bands
- Moving Average
- Moving Average Convergence Divergence
- Exponential Moving Average
- Fibonacci Retracement
- Average True Range
The rate of change trading indicator is also ideal if you wish to combine it with other momentum indicators. Indicators such as the Relative Strength index fit perfectly with ROC. Once you know, the percentage change in an asset’s price makes making well-informed binary options decisions easier.
The limitations of the Rate of change
Just like all trading indicators have their downside, so does the ROC:
- The first drawback traders using ROC face is that they cannot accurately determine the ups and downs.
- Finding accurate information with ROC can get a little tricky.
- Traders need to combine other strategies and technical indicators. ROC is not individually enough to serve any traders’ need for building binary options trading strategies.
Conclusion – The ROC helps to determine the direction of price movement
Binary options trading gets easier as a trader formulates the best trading strategies. Doing this is possible with the help of some technical indicators. Technical indicators such as the ROC help traders in knowing the direction of the price movement of an asset.
When traders know it, they move in a planned manner and can make the best out of binary options trading. They have better chances of making well-informed trading decisions and excelling in binary options trading.
However, traders should combine this indicator with other technical indicators for the best results.
Frequently asked questions about Rate of Change (ROC) indicator:
What is the Rate of Change (ROC) indicator in trading?
The ROC indicator measures the percentage change in the price of an asset over a specific period, helping traders assess market momentum.
How is the ROC indicator calculated?
ROC is calculated using the formula: (Closing price now – closing price before the ‘n’ period) / closing price before the ‘n’ period x 100.
Can the ROC indicator be used alone for trading decisions?
No, while ROC is useful, it’s not sufficient on its own. It’s best used in conjunction with other indicators and strategies for more accurate trading.
What are some strategies to use with the ROC indicator in binary options trading?
Strategies include news trading, trend analysis, and combining ROC with other technical indicators like Stochastic Oscillator, Bollinger Bands, and Moving Averages for more accurate analysis.