Rate of Change (ROC)¶
| Name | Type | Prerequisite | Use Cases |
|---|---|---|---|
| Rate of Change (ROC) | Momentum | OHLC Data | Identifies price velocity and potential trend exhaustion. |
Definition¶
The Price Rate of Change (ROC) is a momentum-based technical indicator that measures the percentage change in price between the current price and the price a certain number of periods ago.
Mathematical Equation¶
\[
ROC = \frac{\text{Close}_t - \text{Close}_{t-n}}{\text{Close}_{t-n}} \times 100
\]
Special cases¶
- Maximum possible value: Unbounded
- Minimum possible value: Unbounded
- Behavior: Oscillates around zero, representing the percentage change in price over a period.
Visualization¶
Trading Significance¶
-
Momentum: Rising ROC indicates increasing bullish momentum. Falling ROC (even if positive) indicates waning momentum.
-
Zero Line Cross: Crossing above zero is a buy signal; below zero is a sell signal.