Rate of Change (ROC)

Overview

ROC is an oscillator designed to measure the rate of price change.

Formula

ROC is defined as follows:

ROC = (CP - CPn) / CPn * 100

where

• CP is the latest closing price, and
• CPn is the closing price of n periods ago.

Parameters

ROC only has one parameter, n, that specifies the number of periods over which the closing prices should be compared.

Interpretation

The ROC indicator used in different ways. Some use it follow the trend, others use it as an oscillator to identify overbought and oversold situations, and still others use it as a signal when the ROC crosses the 100 line.