# Indicator Help

 Indicator Index * Members Only

### Rate of Change (ROC)

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This study monitors market momentum. It calculates the market's rate of change relative to previous trading intervals. You specify the value. At the peaks, the indicator suggests a market that is overbought. Valleys or troughs indicate an oversold market condition.

Some market technicians use a very simplified approach for the rate of change study. It issues buy and sell signals based upon the midpoint or zero line. You sell when the rate of change line crosses from above to below. You buy when the indicator crosses from below to above. This assumes an oversold or overbought market condition precedes the crossover.

The indicator calculates the rate of change study somewhat differently than traditional methods. As a result, the midpoint or zero line has a value of 10,000, not zero.

In most instances, it is best to use the indicator as a precursor to change in market direction. One approach is to establish extreme zones for the study, much like the RSI or Stochastic. Also, the indicator is similar to an oscillator with regard to the market accelerating or decelerating. However, a good technical analyst must learn to tolerate the study in extreme bull and bear markets. It can generate many false signals under those market conditions.

Parameters:
• Period (10) - the number of bars, or interval, used to calculate the study
Computation

Using the value you specify, The indicator computes the change from the current price relative to the price from the number of specified intervals prior to the current price.

The general formula is as follows:
ROCt = (Pricet / Pricen) * 10000
• ROCt is the rate of change value for the current period.
• Pricet is the current price.
• Pricen n is the price you specify for the nth interval (open, high, low, close, midpoint or average).
• n is the length of period you specify.
This example uses a current price of 7485 and a price n intervals ago of 7440.
ROC = (7485 / 7440) * 10000
= 1.006 * 10000
= 10006
The indicator performs the calculations in seconds. As you examine the chart, notice how the values deviate about midpoint. The midpoint value is always 10,000. You can now apply the trading rules as detailed above. You might want to experiment with various lengths for the ROC and for different prices. For a fast moving study, you use a short period and normal price. To slow the indicator, extend the period and use the midpoint or average price.
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