Rate of Change (ROC)

Rate of change is the N-bar return. Positive ROC means the close is higher than it was N bars ago. The zero line is unchanged price. It is the simplest momentum measure. There are no bounds. A stock that has doubled has ROC of 100 over that window, whatever an oscillator says.

A rising ROC means the advance is speeding up. A falling ROC while price still rises means the advance is continuing at a slower pace. That slowdown is deceleration, not a reversal, until price actually breaks. The spike when a large bar enters the window, and the drop when it leaves, are window effects. Look at the calendar before you trade the jump.

Use ROC to compare speed across markets, because it is a percent. Use a zero-line cross as a coarse trend filter. Use a divergence between price highs and ROC highs as a warning that the percent pace has faded. Confirm with structure.

Treating a high ROC as overbought in a market that trends in percent terms for months. Also comparing a 9-bar ROC on one chart with a 200-bar ROC on another as if the number meant the same thing.

ROC looks backward exactly N bars and forgets the path in between. A crash and a full recovery can show a small ROC if the endpoints match. The path is on the chart. Use it.