Why The ROCnROLL Indicator Can Keep You Out Of Trouble

The ROCnROLL indicator is one of the lesser known indicators but it is one of the most useful. It is available if you have access to the ProRealTime or IG Index charts, and you might want to consider adding it to your charts because it is essentially a histogram that tells you the current trend.

I have talked about the ROCnROLL indicator before back in 2008, but in simple terms a green bar indicates a bullish trend, a red bar indicates a bearish trend and a blue bar indicates that there is no clear trend at the current time.

Therefore if you only trade positions based on this particular indicator, you will always be on the right side of the current trend, and will therefore keep yourself out of trouble.

To give you a few examples, if you look at the daily chart of the FTSE 100 you will see that this indicator hasn't been green since 26 July, and this is generally reflected in the price which has been in a big downward trend since that date. It is the same with the Dow Jones which hasn't been green since 25 July.

I have to admit I haven't been following this indicator because I've done very well going long on FTSE 100 stocks and actually buying shares at certain times during the last few months. However I have been shorting the FTSE as well on a few occasions, and you could argue that I would have made more money by following this trend and only trading short positions whilst this downward trend prevails.

The point is that this indicator is a very useful guide for telling you the current trend. If you look at the main forex pairs, on the GBP/USD pair the ROCnROLL indicator has been red since 31 August and this is reflected in the price because it has dropped heavily since then, and it is a similar story with the EUR/USD pair as well.

This indicator is just as useful on the shorter time frames as well. For example if you are day trading you may want to follow the ROCnROLL indicator on the 1 hour and 15 minute chart, wait until they are in agreement with each other, and then trade a corresponding position on the 5 minute chart when the opportunity presents itself.

There are lots of ways you can use the ROCnROLL indicator, and I would certainly recommend you add it to your charts if you have access to it because it may well improve your trading if it helps you stay on the right side of the trend.