Rate of change
Momentum expressed as a percentage change over the chosen lookback period, rather than a raw price difference.
What the numbers mean
The lookback is the number of bars back that today's price is compared to, and the result is expressed as a percentage rather than a price difference. Twelve is common for short-term work and 25 for intermediate trend analysis.
- 9 or 12 — short-term; roughly two to three weeks
- 25 — intermediate trend analysis
- 200 — a long-term reading, used to compare a year's performance
- Expressed as a percentage, so different securities can be compared directly
How it is used
Read for zero crossings (the trend changing hands over that horizon), for extremes relative to the security's own history, and for divergence against price.
- Zero crossings → the trend changing hands over that horizon
- Extremes relative to the security's own history → stretched conditions
- Divergence against price → momentum and price disagreeing
How it relates to everything else
ROC is momentum normalised, which is what makes it the standard tool for relative-strength comparisons between securities. It has no fixed overbought level, so its extremes have to be learned per name — the same reading that is routine in a volatile stock is exceptional in a utility.
- ROC across several securities → the basis of relative-strength ranking
- SROC is this same calculation run on smoothed price
- Shares momentum's base-effect quirk: the old bar leaving the window moves the line
What to watch for
There are no fixed overbought levels — what counts as an extreme has to be learned per security. The same base-effect problem applies: the reading moves when the old bar leaves the window, not only when today's price moves.