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Indicators: Volume Rate of Change (VROC)

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Volume Rate of Change (VROC):

Volume Rate of Change (VROC) is an indicator of the direction where the volume trend moves.

Its idea lies in the fact that almost all important graphical formations (peaks, bottoms, breaches, etc.) are accompanied by a dramatic increase of trade volume.

The indicator is the difference between current bar volume and the volume n periods ago. If the current bar volume is higher than it was n periods ago, the value of the indicator will be positive. If the current volume is lower, VROC will obtain a negative value. Thus, the indicator gives an idea of the volume change speed.

Determining the calculation period is very important while working with this indicator. Short periods of 10-15 bars show sudden changes of volume. However, for signals that are more realistic it is better to choose periods of 25-30 bars. This gives a smoother and more rounded line and makes the analysis easier. At the same time, using short periods gives a more broken, "noisy" line and complicates the analysis.

Volume Rate of Change indicator

Author: MetaQuotes Software Corp.

Sergey Golubev
Sergey Golubev  

Volume Rate of Change

The Volume Rate of Change indicator measures the percentage change of current volume as compared to the volume a certain number of periods ago. The Volume Rate of Change indicator can be used to confirm price moves or detect divergences. The formula for Volume Rate of Change is expressed below:

  • [(Current Volume / Volume n periods ago) - 1] x 100

Generally, the Volume Rate of Change is calculated based on 14-periods for input n, but of course can be modified to any trader preferred period. A chart of the 100 ounce Gold futures is shown below with the 14-day Volume Rate of Change indicator:

As the price of Gold was increasing, the Volume Rate of Change indicator was increasing as well, indicating that there was buying interest as prices were rising. When Gold broke above trendline resistance, the Volume Rate of Change indicator surged higher, showing that buyers were extremely interested in buying Gold.

Using volume to confirm price analysis can help a trader make better trading decisions.
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