Volume Rate of Change - Technical Analysis Indicator

August 2, 2008 by admin

Technical Analysis

Volume Rate of Change Definition

The volume rate of change (ROC) is a technical indicator used to gauge the volatility in a security's volume. The volume rate of change is a powerful indicator when estimating a security's ability to push through key resistance. The volume ROC is calculated the exact same way as the rate of change indicator except instead of tracking the closing price it tracks volume.

Volume Rate of Change Formula

The volume ROC is calculated by dividing the volume over the last "x" periods by the volume over the last "x" periods ago. If the volume from today is lower than "x" periods ago, then the volume ROC is trending lower. Below is the formula for the volume ROC:

Volume ROC = ((Volume - Volume n-periods ago )/ Volume n-periods ago) *100

Interpreting the Volume ROC

The volume rate of change indicator is subjective like many other technical indicators. The first question you have to ask yourself is how many periods should feed the input for the indicator. The shorter the periods, the greater price fluctuations will occur for the volume ROC indicator. Assuming you have selected the correct input value for the timeframe you are trading on, you want to see the volume ROC pick up significantly as it breaks through resistance. This is a sign that you are correct in your long position and the trend should remain intact for the near term.

Volume Rate of Change Charting Example

Below is a charting example of a breakout that was confirmed by a significant increase in the Volume ROC indicator.

Volume Rate of Change

Add new comment

Learn Secret Day Trading Strategies


	How to Trade the Average Directional Index (ADX)

Technical Analysis Articles


Rising and Falling Three Methods	The bullish rising three method and bearish falling three method candlestick patterns are continuation candlestick patterns.
Three Stars in the North - Bearish Reversal Candlestick Pattern	The three stars in the north formation is a rare bearish candlestick reversal pattern. It is comprised of three candlesticks and is an early sign that a bearish reversal is in play.
Kagi Charts - Technical Analysis Charting Method	Kagi charts is a Japanese charting method used by trend following traders to remove the noise from the market. Kagi charts are comprised of thick and thin black lines used to identify swing points for a security.
Public Short Ratio - Market Sentiment Indicator	The Public Short Ratio (PSR) is a market sentiment indicator that is used as a contrarian trading strategy. The indicator displays the relationship between the number of public short sellers and the total number of short sales.
Fibonacci Extensions - Price Projecting Technique	Fibonacci Extensions are used to set price targets that are beyond the standard 100% retracment level.