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Definition of 'Rate Of Change'
The speed at which a variable changes over a specific period of time. Rate of change is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another. Graphically, the rate of change is represented by the slope of a line.
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Investopedia explains 'Rate Of Change'
Rate of change is often illustrated by the Greek letter delta. Many traders pay close attention to the speed at which one variable changes relative to another. For example, option traders study the relationship between the rate of change in the price of an option relative to a small change in the price of the underlying asset, known as an options delta.
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Divergences may signal a change in market direction, but traders must also identify the speed of that change.
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Learn how to build a price rate of change indicator and incorporate it in your strategy.
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We teach you how to confirm buy and sell signals by comparing two very simple indicators.
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