Price Rate Of Change - ROC

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DEFINITION of 'Price Rate Of Change - ROC'

A technical indicator that measures the percentage change between the most recent price and the price "n" periods in the past. It is calculated by using the following formula:

(Closing Price Today - Closing Price "n" Periods Ago) / Closing Price "n" Periods Ago

ROC is classed as a price momentum indicator or a velocity indicator because it measures the rate of change or the strength of momentum of change.

Price Rate Of Change (ROC)

BREAKING DOWN 'Price Rate Of Change - ROC'

Many traders use a value greater than zero to indicate an increase in upward momentum and a value less than zero to indicate an increase in selling pressure. However, some of the most valuable signals are generated when the price of the asset and the ROC are heading in opposite directions (known as divergence). For example, in the chart above you can see that the ROC is sloping downward while the price of the asset is increasing. This is generally an early indication that a sharp decline may be on the way.


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RELATED FAQS
  1. What is a common strategy traders implement when using the Price Rate Of Change (ROC)?

    A common strategy traders implement using the price rate of change (ROC) indicator is using the indicator's slope to identify ... Read Full Answer >>
  2. How do I use Price Rate Of Change (ROC) for creating a forex trading strategy?

    The price rate of change (ROC) technical indicator is a momentum indicator, or oscillator, which can be used to indicate ... Read Full Answer >>
  3. Why is the Price Rate Of Change (ROC) important for traders and analysts?

    The price rate of change (ROC) indicator can be an important tool to help traders and market analysts gauge the momentum ... Read Full Answer >>
  4. What are the best technical indicators that complement the Price Rate Of Change (ROC)?

    Some of the best technical indicators to complement a trading strategy using the price rate of change, or ROC, are moving ... Read Full 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 Full Answer >>
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    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>

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