S-RoC oscillator was developed by Fred G Schutzman and presented in A. Elder’s book Trading for a Living. The indicator is a refinement of RoC oscillator: S-RoC is based on the comparison of two exponential moving averages.
S-RoC = EMA(N)/EMA(N — K)*100, where
N – number of periods;
K – smoothing factor.
S-RoC is the simplest oscillator of the technical analysis. It is easy to use and good in producing logical signals that can be applied for trading price reversals. In this regard the indicator is more suitable for countertrend strategies rather than for trend-following techniques as S-RoC can form many false signals during strong directional movement.
If the S-RoC indicator accelerates, it can signify the price growth. Consequently, if it goes down, the pace of growth is easing. In case S-RoC indicator reverses, the tendency may change.
Thus, S-RoC helps to detect major tendencies on bullish and bearish markets. In that connection, S-RoC can be used to denote the direction of long-term tendencies to trade with the oscillator.
Independent signals act as follows:
- If S-RoC falls below 0 level and then turns back up, a buy signal is generated
- If S-RoC rises above 0 level and then goes back down, a sell signal is produced
- Divergence/convergence signal also appears on S-RoC indicator. This signal is of great importance and is very strong. It should be employed in trading
InstaForex S-ROC parameters
MA_Period = 13
ROC_Period = 21