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technical_indicators:rate_of_change_roc_and_momentum [2019/06/24 19:39] 127.0.0.1 external edit |
technical_indicators:rate_of_change_roc_and_momentum [2023/11/21 14:58] jayanthi [Interpretation] |
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| ====== Rate of Change (ROC) ====== | ====== Rate of Change (ROC) ====== | ||
| - | ===== Introduction ===== | + | ===== What Is the Rate of Change Indicator? ===== |
| The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure [[:technical_indicators:introduction_to_technical_indicators_and_oscillators#momentum_oscillators|momentum oscillator]] that measures the percent change in price from one period to the next. 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. As a momentum oscillator, ROC signals include centerline crossovers, divergences and overbought-oversold readings. Divergences fail to foreshadow reversals more often than not, so this article will forgo a detailed discussion on them. Even though centerline crossovers are prone to whipsaw, especially short-term, these crossovers can be used to identify the overall trend. Identifying overbought or oversold extremes comes naturally to the Rate-of-Change oscillator. | The Rate-of-Change (ROC) indicator, which is also referred to as simply Momentum, is a pure [[:technical_indicators:introduction_to_technical_indicators_and_oscillators#momentum_oscillators|momentum oscillator]] that measures the percent change in price from one period to the next. 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. As a momentum oscillator, ROC signals include centerline crossovers, divergences and overbought-oversold readings. Divergences fail to foreshadow reversals more often than not, so this article will forgo a detailed discussion on them. Even though centerline crossovers are prone to whipsaw, especially short-term, these crossovers can be used to identify the overall trend. Identifying overbought or oversold extremes comes naturally to the Rate-of-Change oscillator. | ||
| - | ===== Calculation ===== | + | ===== How To Calculate Rate of Change ===== |
| <code> | <code> | ||
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| The table above shows the 12-day Rate-of-Change calculations for the Dow Industrials in May 2010. The yellow cells show the Rate-of-Change from April 28th to May 14th. It is actually 13 trading days, but the close on the 28th acts as the starting point on the 29th. The blue cells show the 12-day Rate-of-Change from May 7th until May 25th. | The table above shows the 12-day Rate-of-Change calculations for the Dow Industrials in May 2010. The yellow cells show the Rate-of-Change from April 28th to May 14th. It is actually 13 trading days, but the close on the 28th acts as the starting point on the 29th. The blue cells show the 12-day Rate-of-Change from May 7th until May 25th. | ||
| - | ===== Interpretation ===== | + | ===== How To Interpret Rate of Change ===== |
| As noted above, the Rate-of-Change indicator is momentum in its purest form. It measures the percentage increase or decrease in price over a given period of time. Think of it as the rise (price change) over the run (time). 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 dives deeper into negative territory as a decline accelerates. There is no upward boundary on the Rate-of-Change. The sky is the limit for an advance. There is, however, a downside limit. Securities can only decline 100%, which would be to zero. Even with these lopsided boundaries, Rate-of-Change produces identifiable extremes that signal [[:glossary_o#overbought|overbought]] and oversold conditions. | As noted above, the Rate-of-Change indicator is momentum in its purest form. It measures the percentage increase or decrease in price over a given period of time. Think of it as the rise (price change) over the run (time). 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 dives deeper into negative territory as a decline accelerates. There is no upward boundary on the Rate-of-Change. The sky is the limit for an advance. There is, however, a downside limit. Securities can only decline 100%, which would be to zero. Even with these lopsided boundaries, Rate-of-Change produces identifiable extremes that signal [[:glossary_o#overbought|overbought]] and oversold conditions. | ||
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| </code> | </code> | ||
| - | For more details on the syntax to use for ROC scans, please see our [[docs>scans:indicators#rate_of_change_roc|Scanning Indicator Reference]] in the Support Center. | + | For more details on the syntax to use for ROC scans, please see our [[https://support.stockcharts.com/doku.php?id=scans:indicators#rate_of_change_roc|Scanning Indicator Reference]] in the Support Center. |
| ===== Further Study ===== | ===== Further Study ===== | ||