ROC [CHE] with Kernel Selection

13 Jun

Introduction:
The script titled "ROC [CHE] with Kernel Selection" utilizes Rate of Change (ROC) to analyze price momentum in financial markets. It incorporates a kernel selection mechanism to smooth ROC values, enhancing clarity in trend identification.

Middle Part:
The script begins by calculating ROC over a specified period using the formula:
roc = (close - close[lengthPeriod]) / close[lengthPeriod] * 100
The period length determined by the user. The result is plotted alongside a zero line for reference.
The kernel selection aspect allows users to choose from various smoothing techniques:

Linear
Exponential
Epanechnikov
Triangular
Cosine

Each kernel applies a different weighting function to ROC values, influencing the sensitivity and smoothness of the plotted line. Users can customize parameters such as bandwidth and color preferences for up and down movements, facilitating visual interpretation.
The main logic of the script involves iterating through historical data to compute weighted averages of ROC values based on the selected kernel. It adjusts graphical elements dynamically, highlighting changes in momentum direction with color-coded lines and directional symbols (▲ or ▼).

Conclusion:
In conclusion, "ROC [CHE] with Kernel Selection" offers a flexible toolset for traders and analysts to assess price momentum robustly. By integrating kernel-based smoothing techniques, it enhances the clarity of ROC signals, aiding in the identification of trends and potential reversals in financial markets.