What is 'Rate Of Change'
The rate of change (ROC) is the speed at which a variable changes over a specific period of time. ROC 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. The ROC is often illustrated by the Greek letter delta.
BREAKING DOWN 'Rate Of Change'
ROC is used to mathematically describe the percentage change in value over a defined period of time, and it represents the momentum of a variable. The calculation for ROC is simple in that it takes the current value of a stock or index and divides it by the value from an earlier period. Subtract one and multiply the resulting number by 100 to give it a percentage representation.
ROC = {(current value / previous value)  1} x 100.
The Importance of Measuring ROC
ROC is an extremely important financial concept because it allows investors to spot security momentum and other trends. For example, a security with high momentum, or one that has a positive ROC, normally outperforms the market in the short term. Conversely, a security that has a ROC that falls below its moving average or one that has a low or negative ROC is likely to decline in value and can be seen as a sell signal to investors.
ROC is also a good indicator of market bubbles. Even though momentum is good and traders look for securities with a positive ROC, if an broadmarket ETF, index or mutual fund has a sharp increase in its ROC in the short term, it may be a sign that the market is unsustainable. If the ROC of an index or other broadmarket security is over 50%, investors should be wary of a bubble.
Rate of Change and its Relationship With Price
The ROC is most often used to measure the change in a security's price over time. This is also known as the price rate of change. The price rate of change can be derived by taking the price of a security at time B minus the price of the same security at time A and dividing that result by the price at time A.
Price rate of change = (price at time B  price at time A) / price at time A
This is important because many traders pay close attention to the speed at which one price 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.

Price Rate Of Change  ROC
A technical indicator that measures the percentage change between ... 
Price Change
The difference in the cost of an asset or security from one period ... 
Disparity Index
A technical indicator that measures the relative position of ... 
Percentage Change
Percentage change is a simple mathematical concept that represents ... 
Greeks
Dimensions of risk involved in taking a position in an option ... 
Variable Interest Rate
An interest rate on a loan or security that fluctuates over time, ...

Options & Futures
Divergences, Momentum And Rate Of Change
Divergences may signal a change in market direction, but traders must also identify the speed of that change. 
Active Trading Fundamentals
Identifying Market Trends
The success or failure of your long and shortterm investing depends on recognizing the direction of the market. 
Active Trading Fundamentals
How Market Psychology Drives Technical Indicators
The tenets of market psychology underlie each and every charting tool. 
Technical Indicators
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. 
Personal Finance
How to Manage Corporate Change in the Modern Economy
Change can make employees uncomfortable, but these keys can help ease the transition and increase morale. 
Options & Futures
Sensitivity Analysis For BlackScholes Pricing Model
Trading options requires complex calculations, based on multiple parameters. Which factors impact option prices the most? 
Options & Futures
How & Why Interest Rates Affect Options
The Fed is expected to change interest rates soon. We explain how a change in interest rates impacts option valuations. 
Options & Futures
The Forex Greeks And Strategies
We look at the different kinds of Greeks and how they can improve your forex trading. 
Investing
What's a Sensitivity Analysis?
Sensitivity analysis is used in financial modeling to determine how one variable (the target variable) may be affected by changes in another variable (the input variable). 
Investing Basics
What is an Index?
An index is a statistical means of calculating a change in an economy or market.

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 >> 
How do I use Price Rate Of Change (ROC) for creating a forex trading strategy?
Learn an intraday forex trading strategy that uses the price rate of change (ROC) oscillator to indicate temporary overbought ... Read Answer >> 
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 >> 
What is a common strategy traders implement when using the Price Rate Of Change (ROC)?
Learn a straightforward trading strategy for trend following commonly used by traders implementing the price rate of change ... Read Answer >> 
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 >> 
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 >>