The Volume Rate of Change indicator or VROC for short is a versatile indicator that works on the principle that key reversals in price is usually represented with heavy volumes, especially at peaks and troughs. The validation of the price change with volume adds more validity to the reversal.
When the current volume is more than what it was previously the indicator rises and when current volume is lower than what it was previously, the VROC indicator declines. In other words, the VROC identifies the increase in volumes which occur at significant tops and bottoms and during breakouts.
The VROC calculation is rather simple, where the volume of current bar is subtracted from the volume of the previous periods specified, divided by the same and represented by multiplying the value by 100.
The Volume Rate of Change comes with the flexibility of changing the number of bars or periods to calculate with the default period being 25. For the short term measurement, typical values are between 10 – 15 bars. The settings of 20 and above are valid for longer terms such as the daily time frames. The sensitivity of the indicator can be changed as per the changing settings for the VROC indicator