The Price Rate-of-Change (ROC) indicator displays the difference between the current price and
the price x-time periods ago. The difference can be displayed in either points or as a percentage. The ROC displays the wave-like motion in an oscillator format by measuring the amount that
prices have changed over a given time period. This cyclical action is the result of the changing
expectations as bulls and bears struggle to control prices. Usage:
ROC is a momentum indicator that measures velocity and also leads the price action. As prices
increase, the ROC rises; as prices fall, the ROC falls. The greater the change in prices, the
greater the change in the ROC. The time period used to calculate the ROC may range from 1 to
200-period (or longer).
The
most popular time periods are the 12 and 25 period ROC. The higher
the ROC, the more overbought the security; the lower the ROC,
the more likely a rally. However, as with all overbought/oversold
indicators, it is prudent to wait for the market to begin to correct
(i.e., turn up or down) before placing your trade. A market
that appears overbought may remain overbought for some time.
In fact, extremely overbought/oversold readings usually imply
a continuation of the current trend.
The 12-period ROC tends to be very cyclical, oscillating back
and forth in a fairly regular cycle. Often, price changes
can be anticipated by studying the previous cycles of the ROC
and relating the previous cycles to the current market.

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