Wednesday, April 17, 2024

Rate of Change (ROC)

Rate of Change (ROC) is a technical indicator that measures the percentage change between the current price and the price x days ago.

The

ROC indicator, also known simply as Momentum, is a pure momentum oscillator.

The technical indicator plots below the price chart and forms an oscillator that fluctuates above and below the zero line as the rate of change changes from positive to negative values.

ROC

ROC expanded into positive territory as prices accelerated.

The rising rate of change reflects the sharp increase in price.

If the ROC is positive and rising, buying pressure is increasing.

If the ROC is positive but declining, buying pressure is decreasing and price increases are slowing.

As the decline accelerates, the

ROC sinks further into negative territory.

A downward plunge indicates a sharp price drop.

If ROC is negative, it means selling pressure, causing the price to fall.

The more negative the ROC, the stronger the selling pressure and the faster the price will fall.

When ROC crosses above 0, it is usually considered a buy signal.

When ROC is below 0, it is usually considered a sell signal.

How to calculate ROC

ROC is the percentage change between the current price and the earlier closing price n periods ago.

ROC = [(Today’s Close Price – Close Price n periods ago) / Close Price n periods ago] x 100

The

ROC for the 10-day period is calculated as follows:

ROC = [(Today's Close Price – Close Price from 10 days ago) / Close Price from 10 days ago] x 100

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