ROC (Rate of Change)

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.

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.

• 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

Buy signals

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

Sell signals

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

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

| Condition | Meaning | |-----------|---------| | ROC(12) > 0 | Positive momentum | | ROC(12) < 0 | Negative momentum | | ROC(12) cross_over 0 | Momentum shifted to bullish | | ROC(12) > 5 | Strong upward momentum (>5% change) |

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 you care about the absolute price change.

| 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 |

• 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