Indicator Overview

The Volume Rate of Change (RoC) is a momentum-based oscillator designed to measure the acceleration or deceleration of capital flows into the asset. Instead of viewing raw dollar volume, this indicator calculates the percentage change in traded value over a rolling monthly window, highlighting how quickly market participation is shifting.

By isolating the velocity of liquidity, the script identifies shifts in market sentiment before they are fully reflected in the price. The colour-mapped gradient visualises the intensity of these momentum shifts, helping traders distinguish between steady accumulation and frantic, high-velocity blow-off phases, to both the upside and downside.

How To Use

Traders use the Volume RoC to identify momentum shifts and gauge the sustainability of current price trends through an oscillator-style lens.

• The Zero-Line Filter: The central horizontal dashed line represents the point of equilibrium. When the oscillator is above zero, volume is accelerating compared to the previous month, signaling growing interest. When it dips below zero, volume is contracting, often seen during consolidations or late-stage exhaustion.

• Momentum Divergences: This is a powerful tool for spotting trend fatigue. If the price is making new highs but the Volume RoC is making lower highs, it suggests the rate of capital entry is slowing down, often a precursor to a price correction.

• Smoothing for Clarity: The RoC is naturally volatile. By using the RoC SMA toggle, you can smooth out the noise of daily trading. A rising SMA above the zero line confirms a high-conviction environment, while a falling SMA suggests the market is entering a low-liquidity lull.

• Identifying Extremes: Bright green spikes indicate extreme velocity in capital flow. These typically coincide with major market events, such as short squeezes or FOMO-driven rallies or mass capitulations, signalling that the current move is reaching a state of temporary overextension.