Rate of Change
Technical IndicatorsA momentum oscillator that measures the percentage change in price between the current period and a specified number of periods ago. Positive values indicate upward momentum; negative values indicate downward momentum.
What Is the Rate of Change?
The Rate of Change (ROC) indicator calculates how much the price has changed relative to a past period, expressed as a percentage. The formula is straightforward: ROC = ((Current Price - Price N periods ago) / Price N periods ago) x 100. A ROC of +2.0 means price is 2% higher than N periods ago. A ROC of -1.5 means price is 1.5% lower. The default lookback period is typically 12 or 14.
Interpreting ROC
ROC oscillates around zero. When ROC crosses above zero, upward momentum is beginning. When it crosses below zero, downward momentum is taking hold. Extreme ROC readings (historically high or low for the pair) suggest an overextended move that may revert. On EUR/USD, track the 14-day ROC and compare it to its own 1-year range to identify when momentum is at an extreme.
ROC vs. Other Momentum Indicators
ROC and the Momentum Indicator measure the same concept differently. ROC uses percentage change, making it comparable across different pairs and timeframes. The RSI (Relative Strength Index) normalizes momentum to a 0-100 scale. ROC's advantage is its simplicity and unbounded nature, which makes extreme readings easier to spot. Its disadvantage is no fixed overbought/oversold thresholds. Use ROC for momentum confirmation alongside a trend indicator like MACD (Moving Average Convergence Divergence) or a Moving Average system.
Related Terms
Momentum Indicator
A basic oscillator that measures the difference between the current price and the price a set number of periods ago. Unlike the percentage-based Rate of Change, momentum uses absolute price difference and oscillates around zero.
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and magnitude of recent price changes on a scale of 0 to 100. Readings above 70 suggest overbought conditions; below 30 suggest oversold conditions.
MACD (Moving Average Convergence Divergence)
A trend-following momentum indicator that shows the relationship between two exponential moving averages. The MACD line, signal line, and histogram together help identify trend direction, momentum shifts, and potential entry points.