Description:
The Rate of Change (ROC) indicator, also known as Momentum, is a pure momentum oscillator that helps traders identify the speed at which the price of a security is changing. It was developed by Fred G. Schutzman and introduced in the 1950s.
Input Parameters:
- Length: Number of periods used in a calculation.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Case:
- Identifying overbought and oversold zones: When the ROC reaches extreme levels, it may indicate that a security is overbought (too high) or oversold (too low), signaling a potential price reversal.
- Spotting divergences: If the price of a security is making new highs or lows, but the ROC is not following suit, it could signal a weakening trend and potential reversal.
- Crossovers: Traders may use ROC crossovers above or below the zero line as buy or sell signals.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.