Rate of Change
Last updated
Last updated
Rate of change is the same indicator as Momentum and also shows an acceleration of price movement. But instead of Momentum, Rate of Change is expressed in percantage value. Simply put ROC measures the percentage change in price between the current price and the price N-periods in the past.
Rate of change can be used in variety of different ways. In addition to being used as a general trend or trend strength indicator, the ROC is also commonly used to find a divergence of a price that is a signal of a possible upcoming trend change.
ROC = (Close - Close(N-periods ago))/Close(N-periods ago) x 100
Where: Close - current close price Close(N-periods ago) - the close price N-periods ago
Trend indicating - crossing a zero line could be used as an indicator of a new trend wave.
Divergence/Convergence - Divergence/Convergence pattern is a form of price action when new high(low) of the price not confirmed with a new high/low of ROC. Such price and indicator’s behavior can be interpreted as the weakness of current existing trend.
