Price Change Rate
factor.formula
ROC:
ROCMA:
in:
- :
Price change rate at time t
- :
The closing price of the asset at time t
- :
The closing price of the asset at time t-N, where N is the time window size
- :
The time window size for calculating ROC, which indicates the number of historical cycles to look back. Common values include 12 (for medium-term trend judgment) or shorter periods such as 6 (for shorter-term trading). The larger the value of N, the smoother the ROC and the less sensitive it is to price changes; the smaller the value of N, the more sensitive the ROC and the greater the volatility. The default value is 12.
- :
ROC moving average at time t
- :
Calculate the simple moving average of the ROC sequence for M periods, where M is the time window size.
- :
The time window size for calculating ROCMA indicates the number of time periods for smoothing ROC. The commonly used value is 6, which determines the degree of smoothing of ROC by ROCMA. The larger the value of M, the smoother ROCMA is and the slower it reacts to ROC fluctuations; the smaller the value of M, the faster ROCMA reacts to ROC fluctuations. The default value is 6.
factor.explanation
The rate of change factor (ROC) is mainly used to identify price momentum and potential overbought and oversold areas. In a market with a clear trend, ROC breaking through the zero axis from a negative value is usually regarded as a buy signal, indicating that the price momentum is increasing; conversely, ROC breaking through the zero axis from a positive value is regarded as a sell signal, indicating that the price momentum is increasing. When the market is in a volatile market, the intersection of ROC and its moving average (ROCMA) can provide more accurate trading signals. When ROC breaks through ROCMA upward, it may indicate that the price is about to rise; when ROC breaks through ROCMA downward, it may indicate that the price is about to fall. In addition, ROC can also be used to identify divergence: when the stock price hits a new high but ROC does not hit a new high at the same time, it may indicate that the upward momentum is weakening and the stock price may face a correction; conversely, when the stock price hits a new low but ROC does not hit a new low at the same time, it may indicate that the downward momentum is weakening and the stock price may face a rebound. When the stock price and ROC rise from a low level at the same time, the probability of a short-term rebound is high; when the stock price and ROC fall from a high level at the same time, be alert to the risk of a decline. It should be noted that ROC, as a momentum indicator, may generate more false signals in a volatile market, so it is recommended to combine other technical indicators or fundamental factors for comprehensive analysis. When using ROC for trading, the values of parameters N and M should be flexibly adjusted according to the specific market environment and personal risk preferences.