Price Rate Of Change - ROC

What is the 'Price Rate Of Change - ROC'

The price rate of change (ROC) is 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
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    Learn a straightforward trading strategy for trend following commonly used by traders implementing the price rate of change ... Read Answer >>
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