## What is the 'Price Rate Of Change - ROC'

The price rate of change (ROC) is a technical indicator of momentum that measures the percentage change in price between the current price and the price n periods in the past. It is calculated by using the following formula:

Next Up

## BREAKING DOWN 'Price Rate Of Change - ROC'

The ROC is classed as a momentum or velocity indicator because it measures strength of price momentum by the rate of change. For example, if a stock's price at the close of trading today is \$10, and the closing price five trading days prior was \$7, then the ROC over that time frame is approximately 43, calculated as (10 - 7 / 7) x 100 = 42.85.

## Using the Price Rate of Change Indicator

Like most momentum oscillators, the ROC appears on a chart in a separate window below the price chart. The ROC is plotted against a zero line that differentiates positive and negative values. To traders, positive values indicate upward buying pressure or momentum, while negative values below zero indicate selling pressure or downward momentum. Increasing values in either direction, positive or negative, indicate increasing momentum, and decreasing values indicate waning momentum.

Traders and market analysts use the ROC in different ways. In addition to being used as a general trend or trend strength indicator, the ROC is also commonly used as a divergence indicator that signals a possible upcoming trend change. Divergence occurs when the price of a stock or another asset moves in one direction while its ROC moves in the opposite direction. For example, if a stock's price is rising over a period of time when its ROC values are below the zero line and moving to progressively greater negative values, then the ROC is indicating bearish divergence from price, which signals a probable trend change to the downside.

The ROC is also sometimes used to indicate overbought or oversold conditions for a security. Positive values that are greater than 30 are generally interpreted as indicating overbought conditions, while negative values lower than negative 30 indicate oversold conditions.

One potential problem with using the ROC indicator is that its calculation gives equal weight to the most recent price and the price from n periods ago, despite the fact that most technical analysts consider more recent price action to be of more importance in determining likely future price movement.

RELATED TERMS
1. ### Rate Of Change

The speed at which a variable changes over a specific period ...
2. ### Ease Of Movement

A technical momentum indicator that is used to illustrate the ...
3. ### Momentum

The rate of acceleration of a security's price or volume. The ...
4. ### Divergence

When the price of an asset and an indicator, index or other related ...
5. ### Qstick Indicator

A technical indicator developed by Tushar Chande to numerically ...
6. ### Oscillator

A technical analysis tool that is banded between two extreme ...
Related Articles

### Measure Momentum Change With ROC

Learn how to build a price rate of change indicator and incorporate it in your strategy.

### Using the Coppock Curve to Generate Stock Trade Signals

How the Coppock Curve momentum indicator can help you isolate buying opportunities and exit points in the stock market.
3. Investing

### Using Volume Rate Of Change To Confirm Trends

Wise traders rely on indicators that show a trend in volume, because without supportive volume, a price movement has no conviction.
4. Investing

### Momentum Indicates Stock Price Strength

Momentum can be used with other tools to be an effective buy/sell indicator.
5. Investing

### How to Find Quality Stocks Amid the Wreckage

Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.

### 4 Types Of Indicators FX Traders Must Know

By learning a variety of indicators, you can determine the right time and the right strategy to trade any given currency pair.
7. Investing

### These 25 Stocks Are Dividend Superstars (NVDA, MA)

These 25 stocks are dividend superstars, but only four should be on your radar.
RELATED FAQS
1. ### Why is the Price Rate Of Change (ROC) important for traders and analysts?

Learn what the price rate of change indicator is and understand how this oscillator is commonly used by traders and market ... Read Answer >>
2. ### What are the best technical indicators that complement the Price Rate Of Change (ROC)?

Explore some of the best technical indicators, such as moving averages, that complement trading strategies using the price ... Read Answer >>

4. ### What technical tools can I use to measure momentum?

One of the main goals of every trader using technical analysis is to measure the strength of an asset's momentum and the ... Read Answer >>
5. ### What does it mean to use technical divergence in trading?

In technical analysis, most indicators can give three different types of trading signals: crossing over a major signal line, ... Read Answer >>
6. ### What are common trading strategies when identifying divergence of indicators on a ...

Learn some of the principle strategies traders can employ after spotting a divergence between technical indicators on a price ... Read Answer >>
Hot Definitions
1. ### Private Placement

The sale of securities to a relatively small number of select investors as a way of raising capital.
2. ### AAA

The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
3. ### Backward Integration

A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
4. ### Pari-passu

A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
5. ### Interest Rate Swap

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
6. ### Custodian

A financial institution that holds customers' securities for safekeeping so as to minimize the risk of their theft or loss. ...