2 Day ROC

S

skyfisherman

I would like to hear some of the ways/methods others here use this short-term Momentum indicator (ie. 2 day ROC).

I know Raschke and Connors use it as a way to implement "Taylor's 3 day Cycle" and to establish a market bias. Also, Bob Hunt (PatternTrapper) uses it in a similar way.

I would like to hear further descriptions of these set-ups from anyone who has some experience using them. What exactly constitutes a "signal"...a zero cross...or just a change in direction. Obviously a 2 Day ROC is pretty jumpy.

Any feedback appreciated ! tia


skyfisherman :8^)
 
2 day ROC only works for establishing direction right after opening but only as a confirming tool . For a whole day session direction you will need to go to a vector analysis which is not easy to do .
 
Quote from skyfisherman:


I know Raschke and Connors use it as a way to implement "Taylor's 3 day Cycle" and to establish a market bias. Also, Bob Hunt (PatternTrapper) uses it in a similar way.

I would like to hear further descriptions of these set-ups from anyone who has some experience using them. What exactly constitutes a "signal"...a zero cross...or just a change in direction. Obviously a 2 Day ROC is pretty jumpy.

Any feedback appreciated ! tia


skyfisherman :8^)
More...

the 2 period ROC is a short-term momemtum indicator, so one of the best ways to use it is in conjunction with an intermediate term indicator, for instance the 3-10-16 MACD. looking for at least 2 days of slope opposition, then the short-term momentum should flip back in the longer term momentum's direction

another way to use it is for 4 or 5 day divergences with price

but not suitable in all conditions, low volatility conditions reduce the effectiveness

best just used on the daily charts to gauge market direction for the next day

takes a while to learn all the nuances, but after a couple of years, you catch on . . .


for what its worth . . .
 
seems kind of obvious the starter of this thread was just "fishing" for info and then going to let it die . . .

but since looking at the 2 per ROC on the daily charts at night has been a very useful part of my routine for many years, thought i'd post an example of the divergence setup mentioned earlier

not meant to be a hind-sight call, just an example of what to look for

the basic idea is that short-term momentum preceeds prices, so when new highs are made on the 2 per ROC, the price highs are yet to come

here we have new Mo highs on the 20th, implying higher prices, 4 days later higher prices come, but with a lower high on the ROC


<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=595642>
 

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now going into the next day, we can easily determine what it will take for the ROC to flip down, in this case, a close below 7842, that is the pivot # for the day. here it was evident the hogs were going to close below that #, so the idea is to be short, looking the for lows to be taken out the following day

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=595644>
 

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nice follow-thru

the previous day's lows are taken out early and the hogs continue down thru-out the day. no long term implications here, just a nice 2 day swing

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=595655>


P.S. -- many thanks to the person who asked the question on how to post images directly into a post, and to those who answered it
 

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this doesn't just happen in the hogs

here the T-bonds have been making new 20 day highs, but the ROC says its time for a pull-back

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=596064>
 
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