Question 1

What is ROC?

Accepted Answer

The Rate of Change (ROC) is a momentum oscillator that measures the percentage change in price between the current bar and a bar N periods ago. It oscillates around zero, with positive values indicating upward momentum and negative values indicating downward momentum.

Question 2

How it works

Accepted Answer

ROC calculates the percentage difference between today's price and the price N periods ago: ``` ROC = ((Close - Close[N]) / Close[N]) * 100 ``` The result is a percentage value that is unbounded in both directions.

Question 3

Key features

Accepted Answer

- **Above 0** — Price is higher than N bars ago (bullish momentum) - **Below 0** — Price is lower than N bars ago (bearish momentum) - **Extreme values** — Indicate potential overbought/oversold conditions - **Zero-line crossovers** — Signal momentum shifts

Question 4

Buy signals

Accepted Answer

- ROC crosses above 0 (momentum turns positive) - ROC rebounds from extreme negative values - Bullish divergence: price makes lower low, ROC makes higher low

Question 5

Sell signals

Accepted Answer

- ROC crosses below 0 (momentum turns negative) - ROC reverses from extreme positive values - Bearish divergence: price makes higher high, ROC makes lower high

Question 6

Parameters

Accepted Answer

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 12 | Number of bars to look back |

Question 7

Example conditions

Accepted Answer

| Condition | Meaning | |-----------|---------| | `ROC(12) > 0` | Positive momentum | | `ROC(12) 5` | Strong upward momentum (>5% change) |

Question 8

ROC vs Momentum Indicator

Accepted Answer

ROC and Momentum are closely related but differ in output: | Feature | ROC | Momentum | |---------|-----|----------| | Formula | ((Close - Close[N]) / Close[N]) × 100 | Close - Close[N] | | Output | Percentage (%) | Absolute price difference | | Zero line | 0% | 0 | | Cross-asset comparison | Yes (normalized) | No (price-dependent) | ROC is preferred when comparing momentum across different instruments (e.g., BTC vs ETH) because the percentage format normalizes the scale. Momentum is useful when

Question 9

Common Period Choices

Accepted Answer

| Period | Use Case | |--------|----------| | 1 | Day-over-day change, very noisy | | 5 | Short-term momentum (1 trading week) | | 12 | Medium-term (popular default) | | 20-25 | Swing trading, monthly cycle | | 50-100 | Long-term trend strength |

Question 10

Tips

Accepted Answer

- ROC is one of the simplest momentum indicators - Short periods (5-10) are sensitive and good for short-term trading - Longer periods (20-30) filter noise and suit swing trading - Extreme ROC values often precede mean reversion - Works well as a trend confirmation filter alongside other indicators