Rate of Change (ROC)
Price at
anyone time is determined by the interaction of many
different time cycles. An indicator that takes this into
consideration is likely to be more timely without losing
too much in the way of sensitivity.
R
ate
of change (ROC) measures the speed of an advance or
decline over a specific time span and is calculated by
dividing the price in the current period by the price
N periods ago. The longer the time span under
consideration, the greater the significance of the trend
being measured.
M
ovements
in a 10-day Rate of change (ROC) are far less meaningful
than those calculated over a 12- or 24-month time span.
T
he
use of an Rate of change (ROC) indicator helps to
explain some of the cyclical movements in markets, often
giving advanced warning of a reversal in the prevailing
trend, but a specific time frame used in an Rate of
change (ROC) calculation reflects only one cycle. If
that particular cycle is not operating, is dominated by
another one, or is dominated by a combination of cycles,
it will be of little value.
T
he
6-month Rate of change (ROC) tends to reflect all of the
intermediate moves, and the 24-month series sets the
scene for the major swings. All three ROCes are moving
in the same direction once the new trend gets under way.
ROC Indicator - Rate of Change (ROC)
