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Rate of Change Thresholdmomentum as a number, not as a crossing

Evidence: ModerateIntermediateMomentum · Indicator

The simplest possible measurement: price now divided by price N bars ago. If it is above a threshold, the instrument is in an uptrend; below, a downtrend. No smoothing, no crossings, no lag beyond the lookback itself.

Its value over a moving-average crossing is that it says how much rather than merely which way, which means the same rule can be used as a filter, a ranking and an entry without changing form.

The evidence is for return persistence — instruments that have gone up tend to keep going up for a while. Every page here is one way of measuring that, and the measurement is a choice while the effect is the finding.

Category
Momentum · Indicator
Timeframe
H4 or D1
Suitable pairs
Majors · gold · indices
Session
Bar close
Indicators / tools
Rate of change over 20 bars · ATR(14) · EMA(20) for the entry

Valid setup

MO-07 · RATE OF CHANGE THRESHOLD — VALID SETUP GBPUSD · H4 · the gate is the reading itself, and it is a number rather than a crossing LONG 1.2430 1.2479 1.2527 1.2576 1.2624 1.2673 1.2721 TP1 = 1.5R, then trail 1R EMA(20) — the pullback level TP1 = 1.5R ENTRY = close back above the EMA(20), gate open STOP = 1.5 × ATR(14) below the pullback low 1 2 3 1.2681 1.2618 1.2576 ROC(20), in per cent — the gate opens above +0.5 and the position closes below 0 +0.5 gate 0 — exit ① ROC crosses the threshold — the gate opens ② A threshold, not zero: zero fires in flat markets ③ Scale the threshold to the instrument's volatility ④ Pullback closes back above the EMA(20) — enter ⑤ Two exits: the stop, and ROC back below zero ⑥ No fixed TP2 — that is the part the evidence is about

Exact rules

Entry

  • Compute ROC(20) = (close ÷ close 20 bars ago − 1) at each bar close.
  • Gate: ROC(20) above +0.5% for longs. The threshold is not decoration — a rule with a zero threshold fires constantly in a flat market.
  • Entry: a pullback that closes back above the EMA(20) while the gate is open.
  • The threshold should scale with the instrument's volatility. Half a percent means something different on EURGBP than on gold, and a fixed number across instruments is a bug.

Stop loss

  • 1.5 × ATR(14) below the pullback low.
  • Exit the position if ROC(20) falls back below zero, independent of the stop. The reason for the trade is the reading, not the price.
  • Risk 0.5%–1%.

Take profit / exit

  • TP1 at 1.5R, half off.
  • The rest trails the EMA(20).
  • Do not add a fixed TP2. The momentum evidence is about persistence, and a cap removes the part of the distribution the evidence describes.

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Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.