Technical Analysis

# The Rate of Change Indicator

The Rate of Change indicator (ROC) is a momentum oscillator. It calculates the percent change in price between periods. The ROC indicator might be used to confirm price moves or detect divergences; it might also be used as a guide for determining overbought and oversold conditions.

In general, prices are rising as long as the Rate of Change remains positive. And they are falling when the Rate of Change is negative. An upward surge in the Rate of Change reflects a sharp price advance. A downward plunge indicates a steep price decline.

The ROC can be used in wide time frames, from 1 to 200 candles. ROCs periods of 12 and 15 are the most popular ones, they are perfect for short- and middle-termed trading, In general, the higher the ROC values are, the more prices decline. And vice versa, the lower the ROC values, the higher the prices.

The Rate of Change (ROC) is a momentum indicator. It compares the current price with the previous price from a selected number of periods ago. The current price is divided by the previous price and expressed as a percentage. According to the indicator calculation period it may be both an oscillator (with a period of 5-14) and a trending indicator (with a period more than 20). The ROC has no averaging pattern in its calculations, so it’s synchronized with price indicator, and sometimes even surpassing.

### The ROC setting

To set up the indicator you should choose a special Technical analysis window on Olymp Trade platform. Then choose “the ROC” as a form of the indicators in the “Oscillators” section in the “Indicators” tab.

You should leave the basic period of the indicator (14). The indicator Rate of Change can have both oscillator and trending functions. Its signal mechanics depends on the calculation period. If it’s 5-15 candlesticks the indicator will be an oscillator, and if it’s more than 20, the ROC will function as a trending indicator, as it will show a more global trend momentum.

### Calculation

ROC = (Current Price / Price of n bars ago)-1.0) * 100
Where: n = Time period

ROC is the percentage change between the current price with respect to an earlier closing price n periods ago.

Where

P0 – Today’s Closing Price
P-n – Closing Price n periods ago

There is another varia of the ROC calculation

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