Rate of Change (ROC)


The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure momentum oscillator. The ROC calculation compares the current price with the price "n" periods ago. The plot forms an oscillator that fluctuates above and below the zero line as the Rate-of-Change moves from positive to negative. Like other momentum indicators, ROC has overbought and oversold zones that may be adjusted according to market conditions. Remember, a security can become oversold/overbought and remain oversold/overbought for an extended period.

Chart: Rate of Change
  • An upward surge in the Rate-of-Change reflects a sharp price advance. A downward plunge indicates a steep price decline.
  • In general, prices are rising as long as the Rate-of-Change remains positive. Conversely, prices are falling when the Rate-of-Change is negative.
  • ROC expands into positive territory as an advance accelerates. ROC moves deeper into negative territory as a decline accelerates.

ROC is the percentage change between the current price with respect to an earlier closing price n periods ago.

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

Technical analysis focuses on market action — specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you're most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.