Introduction to The Rate of Change (ROC)
The rate of change (Rate of the Change – ROC) – one of the most simple and very effective oscillators, which shows the percentage change in prices from one period to another.
The Rate of Change indicator is calculated as a comparison of the current price with the price of the previous period, which is spaced from the current one by N periods. The periods of the ROC indicator as always can be intervals from a minute to a month.
Formula of the The Rate of Change (ROC):
Where P0 is the closing price of the current period;
Where Pn – the closing price today N periods ago;
Note: in modern textbooks there is a disagreement about the Rate of Change formulas . The above formula is taken from Murphy’s “Technical Analysis of Futures Markets.” S. 305.
However, there is another variation in the ROC calculation from the book Akelis. Technical analysis from A to Z.
The latest version of the calculation is used in the Metastock and CQG software packages.
Next, we will describe the ROC calculated by Murphy’s formula.
Sample chart with The Rate of Change (ROC) Technical Indicator:
Description of The Rate of Change (ROC) Technical Indicator
Rate of Change as the acceleration indicator allows you to track the smoothed rate of price change. The ROC oscillator graph oscillates above and below the level of a unit (or level 100, depending on whether it is 100% multiplied or not), thereby showing how the acceleration of the price changes, whether it is positive or negative. As a rule, the ROC indicator is slightly ahead of the main price trend and reaches a maximum or minimum earlier than the price does.
Crossing with the ROC indicator level 1 (or 100) and its further growth means an acceleration in the rate of price growth and an increase in the probability of its continuation. Turning the indicator on high levels from the top down means that the trend continues, but it is not gaining momentum, but begins to slow down gradually.
The fall of the ROC indicator above line 1 (or 100) means that the current trend of rising prices slows down the speed.
Crossing from top to bottom units and continuing the fall means accelerating the downward price movement.
A turn at levels below one means a slowdown in prices and a high probability of a reversal of the trend upwards.
The growth of the ROC indicator below line 1 means the attenuation of the downward trend.
It is considered that Rate of Change measures the level of optimism or pessimism of the crowd with respect to this asset, if the indicator grows, remaining above unity, this means that there is a new wave of optimism in the market, if a new low appears in the zone below unity, this means that a new wave pessimism in the market increases the likelihood of further price fall.
If prices continue to rise, making the chart a new high above the previous one, while ROC is growing but its new maximum is lower than the previous one, this means that a divergence in the indicator and price indicators has appeared, and one should prepare for a possible drop in prices.
In the opposite case, if the chart prices make a new low below the previous one, but on the graph indicator appears a new low, but higher than the previous, it is necessary to prepare for a market turn upward.
Thus, the slope of the indicator means the acceleration or slowdown of the trend, and its position relative to the level of unity – what is this trend – a fall or growth.
How to use The Rate of Change (ROC) Technical Indicator?
For the most part, the ROC indicator is used simultaneously with other techniques that support its signals.
The ROC indicator can be used in two main types of strategies : trend following and countertrend:
- When the ROC is used as a trend following indicator , it delivers trend signals when crossing the line of a unit (or line 100). When the line of the unit crosses from the bottom up, a buy signal is given, at the intersection from the top down, a sell signal is given. The number of signals and their accuracy in this case will depend on the main parameter of the indicator. As with other indicators, the shorter the ROC , the faster it reacts to price changes, or in other words, it is more sensitive and, accordingly, gives more false signals. The larger the ROC parameter, the greater the accuracy of its signals, but the longer their delay. Sometimes using short- term ROC indicatorsas a signal to enter the market, the intersection of the unit line is not used, but the intersection of certain levels above the unit line for the buy signal and the intersection of the levels under the unit for the sell signal. Thus, ROC movements within a certain range close to zero are not perceived as signals.
- Due to the fact that the main function of the ROC indicator is to measure the speed of the market, it can be effectively used as a countertrend indicator. Signals in this case come when the indicator is turned as high as possible above unity and as low as possible. A turn above a unit from the top down indicates a possible end of the upward movement and gives a sell signal. A turn far below the unit from the bottom up gives a buy signal. To determine the pivot points, you can also use oversold overbought lines, which are drawn on the chart of the indicator at certain levels. Overbought and oversold levels are selected in such a way that the indicator is in them about 10 percent of the total time.
- Breaks of trend lines on the indicator itself are often ahead of breaks in trend lines on the price chart. These breakthroughs can also be used as signals to enter and exit the market.
Disadvantages of The Rate of Change (ROC) Technical Indicator
Rate of Change as a simple moving average reacts to the price twice: when the price appears for the first time in the numerator, i.e. P0 and when the price appears in the denominator PN.
There are variations of the ROC indicator , for example, a smoothed ROC, which compares not the price of the current period with the price several periods ago, but the current value of the exponential moving average with its value several periods ago. This indicator does not have the above disadvantage, it provides rarer, but better signals.
Kiwango cha mabadiliko (ROC) ni moja ya oscillators rahisi na ufanisi sana, ambayo inaonyesha asilimia ya mabadiliko ya bei kutoka kipindi kimoja hadi kingine. Kiwango cha mabadiliko ni takwimu ya kulinganisha bei ya sasa na bei ya kipindi cha awali, ambayo ni spaced kutoka sasa na N vipindi. Kipindi cha ROC inaweza kuwa kati ya dakika moja hadi mwezi mmoja. "P2 = ""Rate of Change"" (ROC) - ambapo P2 ni bei ya kufunga ya kipindi cha sasa, ambapo P2 ni bei ya kufunga ya leo, N ni kipindi cha nyuma, na P2 ni kiwango cha kufungwa kwa sasa." "Kama ilivyoelezwa hapo juu, ""Murphy"" ni mchanganyiko wa ""Mfano wa Utafiti wa Ufundi wa Masoko ya Futures"" na ""Mfano wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti wa Utafiti.""" Hata hivyo, kuna tofauti nyingine katika hesabu ya ROC kutoka kitabu Akelis. Uchambuzi wa kiufundi kutoka A hadi Z. Toleo la hivi karibuni la hesabu hutumiwa katika Metastock na CQG vifurushi vya programu. Ifuatayo, tutaelezea ROC mahesabu na Murphy's formula. Mfano wa chati na kiwango cha mabadiliko (ROC) kiashiria cha kiufundi: Maelezo ya kiwango cha mabadiliko (ROC) kiashiria cha kiufundi kiwango cha mabadiliko kama kiashiria cha kuharakisha hukuruhusu kufuatilia kiwango cha kubadilika kwa bei. ROC oscillator graph oscillates juu na chini ya kiwango cha kitengo (au kiwango cha 100 kulingana na kama ni 100% mara au si), hivyo kuonyesha jinsi kasi ya bei mabadiliko, kama ni chanya au hasi. Kwa kawaida, ROC inaonyesha mwelekeo wa bei na kufikia kiwango cha juu au cha chini kabla ya bei. Msalaba na kiwango cha kiashiria cha ROC (au 100) na ukuaji wake zaidi unamaanisha kasi katika kiwango cha ukuaji wa bei na ongezeko la uwezekano wa kuendelea kwake. Kugeuza kiashiria juu ya viwango vya juu kutoka juu chini inamaanisha kuwa mwenendo unaendelea, lakini haupati kasi, lakini huanza kupunguza polepole. Kuanguka kwa ROC juu ya mstari wa 1 au 100 inamaanisha kuwa mwenendo wa sasa wa kuongezeka kwa bei hupunguza kasi. Kuvuka kutoka juu hadi chini ya vitengo na kuendelea kuanguka ina maana kuharakisha harakati ya bei ya chini. Mzunguko katika viwango chini ya moja ina maana ya kupunguza bei na uwezekano mkubwa wa kugeuka mwelekeo wa juu. Mfano wa ROC (Risk-Related Component) unaonyesha kuwa kiwango cha chini cha kiwango cha chini cha chini cha chini ya kiwango cha chini cha chini. Kiwango cha mabadiliko ni kipimo cha kiwango cha matumaini au pessimism ya umati wa watu kuhusu mali hii, ikiwa kiashiria kinakua, inabaki juu ya umoja, hii inamaanisha kuwa kuna wimbi jipya la matumaini katika soko, ikiwa kiwango kipya cha chini kinaonekana katika eneo la chini ya umoja, hii inamaanisha kwamba wimbi jipya la matumaini katika soko huongeza uwezekano wa kushuka kwa bei zaidi. Ikiwa bei zinaendelea kuongezeka, na kufanya chati ya juu zaidi kuliko ya awali, wakati ROC inakua lakini kiwango chake kipya ni cha chini kuliko cha awali, hii inamaanisha kuwa kutofautiana kwa kiashiria na viashiria vya bei vimeonekana, na mtu anapaswa kujitayarisha kwa kushuka kwa bei. Katika kesi kinyume, kama chati bei kufanya mpya chini ya moja ya awali, lakini juu ya grafu kiashiria inaonekana mpya chini, lakini juu ya awali, ni muhimu kwa ajili ya kuandaa kwa ajili ya soko kugeuka juu. Hivyo, mteremko wa kiashiria ina maana ya kuharakisha au kupunguza mwenendo, na nafasi yake kuhusiana na ngazi ya umoja <unk> nini mwenendo huu <unk> kuanguka au ukuaji. Jinsi ya kutumia Kiashiria cha Ufundi cha Kiwango cha Mabadiliko (ROC) Kwa sehemu kubwa, kiashiria cha ROC hutumiwa wakati huo huo na mbinu nyingine zinazounga mkono ishara zake. ROC inaweza kutumika katika aina mbili kuu za mikakati: mwenendo kufuatia na countertrend: ROC hutumiwa kama mwenendo kufuatia kiashiria, inatoa mwelekeo ishara wakati kuvuka mstari wa kitengo (au mstari 100). Wakati mstari wa kitengo unavuka kutoka chini hadi juu, ishara ya kununua hutolewa, wakati wa makutano kutoka juu hadi chini, ishara ya kuuza hutolewa. Idadi ya ishara na usahihi wao katika kesi hii itategemea parameter kuu ya kiashiria. Kama ilivyo kwa viashiria vingine, ROC ni fupi, haraka inajibu mabadiliko ya bei, au kwa maneno mengine, ni nyeti zaidi na, kwa hivyo, inatoa ishara za uwongo zaidi. Kadiri ROC inavyozidi kuwa kubwa, ndivyo usahihi wa ishara zake unavyozidi kuwa mkubwa, lakini ndivyo ucheleweshaji wao unavyozidi kuwa mrefu. Wakati mwingine kutumia muda mfupi ROC viashiria kama ishara ya kuingia soko, makutano ya unit line si kutumika, lakini makutano ya ngazi fulani juu ya unit line kwa ishara ya kununua na makutano ya ngazi chini ya unit kwa ishara ya kuuza. Hivyo, harakati ROC ndani ya mbalimbali fulani karibu na sifuri si kuonekana kama ishara. Kwa sababu kazi kuu ya ROC ni kupima kasi ya soko, inaweza kutumika kama kiashiria cha kinyume cha mwelekeo. Ishara katika kesi hii kuja wakati kiashiria ni akageuka kama juu iwezekanavyo juu ya umoja na kama chini iwezekanavyo. Kugeuka juu ya kitengo kutoka juu chini inaonyesha mwisho wa uwezekano wa harakati ya juu na inatoa ishara ya kuuza. Kugeuka mbali chini ya kitengo kutoka chini hadi juu inatoa ishara ya kununua. Ili kuamua pivot pointi, unaweza pia kutumia oversold overbought mistari, ambayo ni kuchorwa juu ya chati ya kiashiria katika ngazi fulani. Viwango vya overbought na oversold ni kuchaguliwa kwa njia ambayo kiashiria ni katika yao kuhusu asilimia 10 ya muda wote. - Kuvunja ya mistari mwenendo juu ya kiashiria yenyewe ni mara nyingi mbele ya kuvunja katika mistari mwenendo juu ya chati ya bei. Maendeleo haya pia yanaweza kutumika kama ishara ya kuingia na kutoka soko. Kiwango cha mabadiliko (ROC) ni kipimo cha kiufundi cha kiwango cha mabadiliko (ROC) ambacho ni wastani wa kutembea kwa mara mbili, na mara moja kwa kila mara wakati bei ya bidhaa inapoonekana kwa mara ya kwanza katika kipimo. P1 = P1 = P2 = P2 = P2 = P3 = P3 = P3 = P3 = P3 = P3 = P3 = P3 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 = P4 Kuna tofauti za kiashiria cha ROC, kwa mfano, ROC iliyopangwa, ambayo hailinganishi bei ya kipindi cha sasa na bei ya vipindi kadhaa zilizopita, lakini thamani ya sasa ya wastani wa kusonga wa exponential na thamani yake ya vipindi kadhaa zilizopita. Kiashiria hiki haina hasara ya juu, inatoa nadra, lakini ishara bora.