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Forex
 

Indices
 

Rate Of Change (ROC)

Rate of Change (ROC) is technical analysis indicator very similar to the momentum. It measures the speed of ascent or descent. The formula to calculate the indicator is:

ROC formula

For better chart clarity it is usually multiplied by the value of 100.

Rate of change
Rate of change


Interpretation

Values of indicator are oscillating around zero. Buying signal is generated when line of rate of change crosses above zero line. Selling signal is generated in the opposite case, when it crosses below zero line.

There is another interpretation of ROC: selling signal is generated when the value of indicator begins to fall after the generated local maximum, and buying when it begins to grow after a local minimum.

ROC can also be used for observation of divergence. So if price falls to new low, but ROC fails to reach new low, downward trend is losing its power and we could expect trend reversal in the near future. Similar goes for upward trend: if ROC fails to reach new high when price hits new high, upward trend is losing its power.


Example

Open chart for google with ROC indicator.


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