Rate of Change Indicator (ROC)

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Definition of 'Rate of Change Indicator (ROC)'

The Rate-of-Change (ROC) indicator is also referred to as Momentum. This indicator is an oscillator that measures the percent change in price from one period to the next.

The ROC calculation compares the current price with the price a given number of periods ago. The indicator plot forms an oscillator that fluctuates above and below a zero line as the Rate-of-Change moves from positive to negative.

Trading signals using the ROC momentum oscillator include:
  • centerline crossovers (watch for whipsaw)
  • bullish divergences
  • bearish divergences
  • overbought readings
  • oversold readings

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