Smoothed Rate of Change
Type
Trend follower
Short introduction
The Smoothed Rate of Change, abbreviated to SROC, was developed by Fred G. Schulman and is a variation of the Momentum or ROC. With SROC, however, an exponential GD is used as the basis for the calculation instead of the price trend.
Statement
The statement largely corresponds to that of momentum, with the difference that the signals are somewhat slower, but also somewhat more accurate.
Formula/calculation
SROC =ROCx (EMAy)
where:
ROC = Rate of Change
EMA = exponential moving average
Interpretation
The interpretation of the SROC follows the rules of momentum. According to Fred G. Schulman, the search for divergences between the SROC and the price trend is particularly interesting. A negative signal is given if the underlying is still forming new highs while the SROC is no longer forming new highs. A positive signal is given when the underlying asset is still forming new lows while the SROC is no longer forming new lows.
Default setting
- x = 13 days (weeks) for ROC
- y = 9 days (weeks) for EMA
Basic trading systems
- Smoothed Rate of Change (SROC)
The base trading system "SROC" has a default setting of 13 days for the ROC and 5 days for the EMA. It provides buy signals when the indicator crosses the zero line from bottom to top and sell signals when the indicator crosses the zero line from top to bottom.