How Is The Volume Rate Of Change Best Used In Technical Analysis? We Spell It Out

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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 might 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:

 
Time Series Forecast

 

As the price of Gold was increasing, the Volume Rate of Change indicator was increasing as well, suggesting that there was buying interest as prices were rising.

When Gold broke above trendline resistance, the Volume Rate of Change indicator surged higher, suggesting that buyers were extremely interested in buying Gold.

The section discussing how traders typically interpret Volume would be an excellent next step (see: Volume) to read.

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Further Reading

Learn more about technical analysis indicators, charting concepts and strategies including Triple Exponential Average (TRIX), Fibonacci Time Extensions, and the McClellan Oscillator.

Also see our guide to understanding the basics of reading candlestick charts and option trading strategies.

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