|Parameter Defaults:||ROC Period||5||controls the measurement period for the rate of change|
The Rate of Change indicator calculates and plots the net change (expressed as a percent) between a bar’s price, and that price a specified number of bars ago. Essentially it is no different to the basic Momentum indicator but expresses price movement as a percentage around 100 rather than a number of points around a zero line.
The formula is expressed as:
|ROC = 100 *||(Pricet – Pricet-1)|
The ROC formula will produce a value that will be above 100 (if price is now higher) or below 100 (if price is now lower). From this we can deduce:
|•||ROC below 100 and moving lower||– price is accelerating lower|
|•||ROC below 100 but rising||– price is generally moving lower but at a slower pace|
|•||ROC above 100 and rising||- price is accelerating higher|
|•||ROC above 100 but declining||- price is generally moving higher but at a slower pace|
Note from the above chart how the Momentum plot and ROC plot are identical but with different values.