Comparing Standard and ATR-Adjusted Rate of Change
Summary
This indicator presents two versions of Rate of Change for viewing price momentum. The standard version expresses the price change relative to the closing price from an earlier period, so the measure is a percentage. The second version scales ROC by Average True Range, adjusting the reading for the instrument's recent volatility.
The stated purpose of the adjustment is to make momentum readings more comparable across assets with different volatility levels. Traders can inspect both raw percentage momentum and volatility-normalized momentum when looking for shifts. The document describes the indicator's construction and intended use, but it provides no parameter settings, signal rules, examples, backtest results, or evidence that either version predicts returns. Cross-asset comparability is an intended benefit rather than a demonstrated result, and the text does not discuss sensitivity to the chosen lookback periods.
Key ideas
- Standard ROC expresses price change relative to an earlier closing price.
- The alternate measure divides ROC by Average True Range.
- ATR scaling is intended to account for differences in asset volatility.
- The indicator displays momentum measures but gives no tested entry or exit rules.
- No performance evidence or parameter guidance is provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.