Investing & Trading

Simple ROC Strategy

By Samantha Baltodano


TL;DR:

The Simple ROC strategy is a technical analysis tool that uses the rate of change of two-bar price momentum to identify potential buy and sell signals in the market. It has two modes, plain and modified FM Demodulator, and can help traders identify potential entry and exit points. 


The modified FM Demodulator mode can filter out noise and provide more accurate signals. However, the strategy has limitations, and traders should use it with other tools and strategies and manage their risk accordingly.


You can access this indicator here.


What Is The Simple ROC Strategy ?

The Simple ROC strategy is a technical analysis tool that traders can use to identify potential buy and sell signals in the market. The strategy is based on the rate of change (ROC) of the two-bar price momentum.


The Simple ROC strategy has two modes: plain and modified FM Demodulator. In both modes, a buy to open simulated order is added when the ROC of the signal variable crosses above zero, and a sell to close simulated order is added when the ROC of the signal variable crosses below zero.


The plain mode calculates the signal variable as an average of the sum of the four last consecutive two-bar price momentums. The FM Demodulator mode calculates the signal variable as an average of the modified FM Demodulator's Timing output of the two-bar momentum.


Using the Simple ROC Strategy

The Simple ROC strategy can help traders identify potential entry and exit points in the market. 


When the ROC of the signal variable crosses above zero, it can be an indication that it might be a good time to enter a long position. Conversely, when the ROC of the signal variable crosses below zero, it can be an indication that it might be a good time to exit the long position or enter a short position.


The modified FM Demodulator mode can help filter out some of the noise in the market data and provide more accurate signals. 


However, traders should keep in mind that no strategy is foolproof, and that past performance is not indicative of future results. The Simple ROC strategy should be used in conjunction with other tools and strategies to make informed trading decisions.


Limitations of the Simple ROC Strategy

Traders should be aware that the Simple ROC strategy has limitations. It is a simple strategy and may not work well in all market conditions. It may also generate false signals, especially in choppy or sideways markets. Traders should also be aware of the risks involved in trading and manage their risk accordingly.


Test The Simple ROC Strategy

Great news! 


You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 


This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.


If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Simple ROC Strategy.


Summary

  • Simple ROC is a technical analysis tool based on the rate of change of two-bar price momentum.
  • Traders can use it to identify buy and sell signals in the market, with two modes available.
  • A buy order is added when the ROC of the signal variable crosses above zero, and a sell order when it crosses below zero.
  • It can help identify potential entry and exit points, but should be used with other tools and strategies.
  • The modified FM Demodulator mode can filter out noise and provide more accurate signals.
  • Limitations include potential false signals and not working well in all market conditions.
  • Traders should manage their risks and be aware of the risks involved in trading.


Simple ROC Strategy is just one of many strategies that Archaide automates. For a full list of strategies and studies available click here.


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