Rate of Change
The Rate of Change or ROC is a non-bound oscillator that fluctuates above and below the zero line. It shows the difference between the current price and the price of n periods on a percentage form.
ROC= (( Close-Close n periods ago))/(Close n periods)*100
When the price rises, the ROC surges, when then price declines, the ROC plunges. The ROC can also determine whether the security is already overbought or oversold. The higher the ROC, the more the security is overbought; the lower the ROC, the more it is oversold. However, like other indicators, ROC may generate whipsaws and so it is recommended to also use other indicators.
The ROC is very similar to the Momentum Indicator. The only difference is that Momentum uses the difference of the prices to calculate while the ROC uses a ratio of the prices.