Rate of Change
ROC

Type:
Oscillator

The Rate of Change delivers the same statement like the momentum indicator.

Calculation of Rate of Change:

ROC = ((C - Ct-n+1) : Ct-n+1) * 100

Interpretation:

The Rate of Change offers varied interpretation possibilities. In the following the most important  are described on their individual ideas.

A Rate of Change in the negative range always points to a downward trend. If the Rate of Change falls, in addition, further, the force of the downward movement increases even further. A rising Rate of Change below the zero line points to an impairment of the downward trend and with it to a perhaps upcoming new, upward directed trend.

A positive Rate of Change displays an upward trend in the basis title, a rising ROC in this range points furthermore to a gain of the upward movement. If the Rate of Change falls, the upward trend could soon approach to the end.

The "classical" signal delivers the breakthrough of the centre line. Bottom up it is a purchase signal, top down a sales signal. To avoid false signals, two auxiliary lines set bottom up or top down can be also marked. In this case a signal should have only validity when one of these auxiliary lines is broken through.

Another application is the search for divergences between market price course and Rate of Change. If the Rate of Change still form new high or low levels, the basis market price, however, any more, is to be calculated on a quick trend change.

It is interesting also to smooth the Rate of Change with a Moving Average to use a GD of the Rate of Change to the signal generation (similar to the MACD) or simply the Rate of Change not to the market price apply, but to another indicator, about one Moving Average.

Preferences:
For the Rate of Change very common values are 10 or 25 days.