Price Change Rate
factor.formula
Rate of Change (ROC):
ROC Moving Average (ROCMA):
in:
- :
The asset price at the current time t, usually the closing price (CLOSE).
- :
The asset price N periods ago, usually the closing price (CLOSE).
- :
Lookback period, i.e. the time window size for calculating the price change rate, means using the prices of the past N periods for comparison. The default value is 12, which can be adjusted according to the transaction frequency and market characteristics. Smaller N values are more sensitive to price changes and may generate more noise; larger N values are smoother but react slower to price changes.
- :
The price change rate at the current time t
- :
The window size of the moving average of ROC is used to smooth the ROC indicator and reduce noise. The default value is 6, which can be adjusted according to market volatility and trading strategies. Smaller M values make ROCMA more sensitive to ROC changes, and larger M values are smoother and can filter short-term fluctuations.
factor.explanation
The rate of change (ROC) indicator measures price momentum by comparing the difference between the current price and the price N cycles ago. A positive ROC value indicates that the price is rising, and a negative ROC value indicates that the price is falling. The larger the value, the stronger the momentum. The application scenarios of the ROC indicator include:
- Trend judgment: In a market with a clear trend, ROC breaking through the zero axis upward is usually regarded as a buy signal, indicating that the upward momentum is increasing; ROC breaking through the zero axis downward is regarded as a sell signal, indicating that the downward momentum is increasing.
- Overbought and oversold judgment: ROC can be used to identify the overbought and oversold state of the market. When ROC reaches an extreme high, it may indicate that the price is about to pull back; when ROC reaches an extreme low, it may indicate that the price is about to rebound.
- Divergence signal: The divergence between the price and the ROC indicator may indicate a potential price reversal. For example, if the price reaches a new high but the ROC fails to reach a new high, it may indicate that the upward momentum is weakening; if the price reaches a new low but the ROC fails to reach a new low, it may indicate that the downward momentum is weakening.
- Moving average crossover: ROCMA can smooth the ROC indicator and reduce noise. When ROC crosses ROCMA upward, it is usually regarded as a buy signal; when ROC falls below ROCMA downward, it is usually regarded as a sell signal. These crossover signals should be used in combination with other technical indicators or market fundamentals to improve trading accuracy.
- **Application of shock market: **In shock market, the combination of ROC and ROCMA can effectively identify buy and sell signals and reduce misjudgment.
Notes:
- The ROC indicator is sensitive to price changes and may generate more noise, so it is recommended to combine other technical indicators and market fundamentals for comprehensive analysis.
- The settings of ROC parameters N and M should be adjusted according to different trading products and time periods.
- The effectiveness of the ROC indicator may vary depending on market conditions. It is recommended to verify it in backtesting and simulated trading.