| Characteristic: | Momentum Indicator | ||
| Parameter Defaults: | ROC Period | 5 | controls the measurement period for the rate of change |
| Plots: | ROC | ||
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:
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ROC = 100 * | (Pricet – Pricet-1) |
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| 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.
