what does the price roc indicator tell you 
the price rate of change is classed as a momentum or velocity indicator because it measures the strength of price momentum by the rate of change for example if a stock s price at the close of trading today is 10 and the closing price five trading days prior was 7 then the five day roc is 42 85 calculated as 10 7 7 100 42 85 begin aligned 10 7 div 7 times 100 42 85 end aligned 10 7 7 100 42 85 like most momentum oscillators the roc appears on a chart in a separate window below the price chart the roc is plotted against a zero line that differentiates positive and negative values positive values indicate upward buying pressure or momentum while negative values below zero indicate selling pressure or downward momentum increasing values in either direction positive or negative indicate increasing momentum and moving back toward zero indicates waning momentum zero line crossovers can be used to signal trend changes depending on the n value used these signals may come early in a trend change small n value or very late in a trend change larger n value the roc is prone to whipsaws especially around the zero line therefore this signal is generally not used for trading purposes but rather to simply alert traders that a trend change may be underway overbought and oversold levels are also used these levels are not fixed but will vary by the asset being traded traders look to see what roc values resulted in price reversals in the past often traders will find both positive and negative values where the price reversed with some regularity when the roc reaches these extreme readings again traders will be on high alert and watch for the price to start reversing to confirm the roc signal with the roc signal in place and the price reversing to confirm the roc signal a trade may be considered roc is also commonly used as a divergence indicator that signals a possible upcoming trend change divergence occurs when the price of a stock or another asset moves in one direction while its roc moves in the opposite direction for example if a stock s price is rising over a period of time while the roc is progressively moving lower then the roc is indicating bearish divergence from price which signals a possible trend change to the downside the same concept applies if the price is moving down and roc is moving higher this could signal a price move to the upside divergence is a notoriously poor timing signal since a divergence can last a long time and won t always result in a price reversal price roc indicator vs momentum indicatorthe two indicators are very similar and will yield similar results if using the same n value in each indicator the primary difference is that the roc divides the difference between the current price and price n periods ago by the price n periods ago this makes it a percentage most calculations for the momentum indicator don t do this instead the difference in price is simply multiplied by 100 or the current price is divided by the price n periods ago and then multiplied by 100 both these indicators end up telling similar stories although some traders may marginally prefer one over the other as they can provide slightly different readings the formula for the momentum indicator is momentum indicator closing pricepclosing pricep n 100where closing pricep closing price of most recent periodclosing pricep n closing price n periods beforemost recent period begin aligned text momentum indicator left frac text closing price p text closing price p n right times100 textbf where text closing price p text closing price of most recent period text closing price p n text closing price n text periods before text most recent period end aligned momentum indicator closing pricep n closing pricep 100where closing pricep closing price of most recent periodclosing pricep n closing price n periods beforemost recent period limitations of using the price roc indicatorone potential problem with using the roc indicator is that its calculation gives equal weight to the most recent price and the price from n periods ago despite the fact that some technical analysts consider more recent price action to be of more importance in determining likely future price movement the indicator is also prone to whipsaws especially around the zero line this is because when the price consolidates the price changes shrink moving the indicator toward zero such times can result in multiple false signals for trend trades but do help confirm the price consolidation while the indicator can be used for divergence signals the signals often occur far too early when the roc starts to diverge the price can still run in the trending direction for some time therefore divergence should not be acted on as a trade signal but could be used to help confirm a trade if other reversal signals are present from other indicators and analysis methods 