RATE OF CHANGE
Whereas the momentum
indicator is an absolute measure of price change, the
rate of change is a relative measure of price change.
The rate of change is calculated by dividing the present
price by the price in a previous period.
Rate
of change
= Pi /
Pi-t
where
P =
price
=
specific time period
=
number of time periods in
the past
Rate of change may be used
in a similar way as the momentum indicator.
WILLIAMS %R
Larry Williams is
credited with developing the %R oscillator. Where H = highest
high of the period
C =
close of the
current period L = lowest low of
the period.
The %R may be calculated
under any number of time periods, but one of the most
common is a ten-day period. The signals for the %R are
similar to those for stochastics and moving average
oscillators.
WILDER'S RELATIVE STRENGTH INDEX
The Relative Strength
Index, developed by Wells Wilder, is used in a similar
way as the other oscillators. The calculation is:
RSI = 100 -
100/(1+R)
where R = U/D
U = average of the days
closing higher during the interval
D = average of the
days closing lower during the interval
A
14-day interval is frequently used, but any number of
days can be used for the interval. The oversold and
overbought areas are usually considered in the 30% or
70% area, respectively, but again you are encouraged to
experiment with different levels and Intervals.
Rate of Change (ROC), Relative
Strength Index (RSI) and Williams %R
