Volume Rate of Change (Volume ROC) Indicator, Strategy

Volume Rate of Change Zerodha

Volume Rate of Change indicator was authored by Omega which is research in 1997. This indicator uses the current volume and a prior volume to create an oscillator which is plotted as a histogram. The traders are may change the input which value is close and period length.

How To Attach Volume Rate of Change Indicator On The Chart?

The traders are want to know more about the Volume Rate of Change indicator, then they can find it in the STUDIES section of Zerodha Kite. It also available in Kite mobile App. The Period is 14 and if the traders want to change the period value then they can change it. Traders can use this Volume Rate of Change indicator on to any time frame charts includes daily, weekly, monthly or intraday. You can also Check the image below to understand how to attach the VROC indicator in HDFC Bank share price chart.

Volume Rate of Change Indicator

Introduction :

The main use or purpose of Rate of Change indicator is to determine the pace at which a Stock changes its Price or Volume over a definite period of time. The Rate of Change indicator is basically used to determine Momentum. The outcome of this indicator can be expressed in terms of a ratio, depicting changes in one variable in relation to changes in another matching variable. In a chart, the slope of a line is often used to draw Rate of Change. In the Rate of Change indicator, volume and price are often used as the parameters to determine the direction of a trend. Volume Rate of Change (VROC) indicator is utilized to form an estimate of Volatility in a Security’s Volume. This indicator clearly depicts the direction of a trend likes positive or negative. In this Volume Rate of Change indicator is often used to confirm price activity and discover divergences in Stock’s Volume. A Security’s Price Changes due to a shift in the Volume of its Shares traded of this indicator. Volume Rate of Change indicator has detected that shift and also confirms it to be either positive or negative via Graphical Formations like Peaks, Breaches, and Foundations etc. In this indicator is the handiest tool to determine a stock’s ability Passover certain resistance or support. The traders can also be used to determine trend changes as well as trend strengths of this.

Volume Rate of Change Zerodha

Example from Upstox

Volume Rate of Change Indicator Guidelines

The above chart is taken from the Upstox trading platform. It is a one-month based chart. Here, the volume rate of change is clearly showing.

The main role of the indicator is it helps in the measurement of the rate of change in volume over a certain session.

Calculation :

Volume Rate of Change (VROC) = [{Volume CURRENT – Volume PREVIOUS}/ Volume PREVIOUS] * 100

In the VROC indicator, VROC % is frequently known as the Heartbeat of Market which is detected terms of Volume. The indicator shows the relative volume of the market. Mainly, the length of Period for Volume Calculation is 14 days. The Previous Value of Volume Rate of Change (VROC) indicator can be for any period subject to the interest of a Trader. The length of this indicator is a rough estimate that can be altered in any direction without any hesitation and period subject to the interest of a Trader.

Specifications :

VROC indicator measures the change in Volume by evaluating Current Volume and Volume “N” days ago differences. If the current Volume is greater than the Previous Volume, then a Positive value will be the outcome of the formula. That means a strong trend prevails in the market relating to Bearish or Bullish market of this indicator. But when the Price of VROC indicator is negative, then this indicates a possible change in the direction of a trend currently prevailing. In another part, of dividing the difference of current and previous Volume of this indicator by the Previous Volume will give the relative speed at which the Volume is changing.

As like a Volume Oscillator indicator, the indicator tends to fluctuate around a central line, mainly it known as zero lines. When the volume rises, the value of the VROC indicator is plotted above the zero line and vice versa. As same as, when the Price of a Security falls, the indicator moves down. In a minor change in Volume, the VROC slope tends to reach the central line. But with a major change in Volume, the indicator follows a breakout. In this indicator, a breakout helps in determining a short-term extreme position. Overbought and Oversold moments often lead to sudden Trend Reversals of this indicator. VROC indicator, helps in choosing the right time to exit and enter the market. Most of the traders are must make decisions in the direction of the trend prescribed by the indicator. In this indicator, if the trend is upward and the Volume Rate of Change turns upward then go long and vice versa.

Advantages of Volume Rate of Change Indicator :

  1. VROC indicator checks the speed at which a trend is moving or deviating. This is the ultimate goal of ever trader like to anticipate the future trend and to determine the pace at which the trend will move. In this indicator sudden changes in the price of securities can give a lot or take a lot. So, VROC indicator evaluates the peaks, bottoms, and breakouts of a security through a Slope of a Line.
  2. The indicator is the only indicator that gauges a security’s Volume Differences. This indicator helps traders in determining a stock’s ability to crossover, support or resist, along with the trend changes and the strength of a trend.
  3. Volume Rate of Change indicator is given a clear picture of the Trend prevailing in the market likes Bullish or Uptrend and Bearish or Downtrend.

Disadvantages of Volume Rate of Change Indicator :

  1. The traders believe that the biggest disadvantage of VROC indicator is that it is blind to the current price situation of a commodity. In this indicator, neither takes price into consideration nor is it affected by a change in price.
  2. It is necessary that a long period is taken into consideration in order to smooth the data otherwise the data will be a mere zigzag of this indicator. In a zigzag course of Volume Rate of Change indicator, the decision making is neither simplified nor trusted instead it is impossible to predict trend on short periods.

Volume Rate of Change (Volume ROC) Indicator, Strategy

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