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RoC Momentum Cycle

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RoC Momentum Cycles (RMC) is derived from RoC (Rate of Change) indicator.

Motivation behind RMC: Addressing RoC’s Shortcomings

While the Rate of Change (RoC) indicator is a valuable tool for assessing momentum, it has notable limitations that traders must be aware of. One of the primary challenges with the traditional RoC is its sensitivity to price fluctuations, which can lead to false signals in volatile markets. This often results in premature entries or exits, impacting trading performance.

By smoothing out the RoC calculations and focusing on more consistent signal generation (using SMA on smoothed RoC), RMC offers a more consistent representation of price trends.

Momentum Cycles

RMC helps visualize momentum cycles in a much better way compared to RoC.

Long Momentum Cycle: A cross-over of smoothed RoC (blue line) above averaged signal (orange line) below zero marks start of a new potential upside cycle which ends when the blue line comes back to zero line from above.
Short Momentum Cycle: A cross-under of blue line below orange line above zero marks beginning of a potential downside cycle which ends when the blue line comes back to zero from below.

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Updated with annotated chart and fixed a typo in script.