Volume Rate of Change

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. Traders can also use the Volume ROC to identify when there is a false breakout and use this as an opportunity to take a counter position.

Al Hill is the co-founder of mysmp.com (My Stock Market Power) which provides education on all topics finance; including stocks, bonds, options, futures, forex, technical analysis, and more! Please visit http://www.mysmp.com for more free financial educational content.

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5 Tips on How to Become Wealthy Trading Forex

Let 's look at 5 things to avoid if you want to make consistent money with Forex.

Let's start with 5 common errors you should avoid.

1. Stay away from day trading the market. With all the volatility and numerous outside influences, it is a losing proposition to get involved in day trading.

2. Avoid guess work. Trying to predict what is going to happen on the Forex market is difficult at best. The trader that falls into this trap will eventually come back to bite you because trading currency simply cannot be guessed.

3. Don't trade with money you cannot afford to lose. Trading with money that should be allocated on your personal budget elsewhere is plain unsmart. Traders do dumb things when they panic and trading with money you really don't have causes panic.

4. Do not try to buy a currency low and sell it high. This may work in the equity market but with currency trading it is not the way to go. It translates into having to predict again where highs or lows will form.

The truth is many major market moves begin from new market highs not lows. The best way to do it is buying the breaks as the chances are more in your corner and you often see large trends come up if, the breakout is from a genuine resistance level.

5. Do not trade without help. You should start off trading Forex with a practice account.

Most importantly, get a really good, reliable software program that is tested and has proven results.

Get an Objective Review of the Most Popular Forex Trading Software Programs. Forex Trading System Review is the place to visit.

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