RATE OF CHANGE OF PRICE (ROC)
Rate Of Change of Price (ROC) gives the price change in a particular fixed time
change. The difference can be display same point or percentage
Description :
Rate Of Change (ROC) directly propose to
price, It mines as stock price increase Rate Of Change of Price (ROC) increased & as stock
price decreased Rate Of Change of Price (ROC) decreased.
Time period is important factor for Rate Of Change of Price (ROC). The
most popular time frame is 12 and 25 days. The 12 days period is
best to find stock market are over bought or over sold, for short
term & intermediate term. Higher Rate Of Change of Price (ROC) indicates stocks are
overbought & Lower Rate Of Change of Price (ROC) indicates oversold stock position.
Normally when stocks comes in oversold position
it indicates it’s ready to move up side & in overbought position
stock price normally come down.
How to Calculate?
Here we calculate 12 days ROC
1) Take Today’s Close Price (say “A”)
2) Take 12 days before Close Price (say “B”)
ROC=[(A-B )/B]*100
The Rate Of Change of Price (ROC) oscillator fluctuates above and below
the zero line. Values of ROC are always between 0% and 100%.You can
buy stock when you see ‘s positive divergence & sell with negative
divergence.
Momentum : Momentum is the measure of speed and breadth of progress or regress in a stock market. Speed
is measured by Rate Of Change of Price (ROC) and breadth is determined by the number of stocks
advancing minus the number of stocks decling on a daily basis continuouslly added to a running toatal.
Here we looking net stock participate to major trend.
Rate Of Change of Price (ROC) always show one or more lower peaks when market prices
arrives near the top. When the stock market in overbought condition in middel of major
trend, all or most Rate Of Change of Price (ROC) hits new highs. Any time Rate Of Change
of Price (ROC) retreats to modrate oversold zone after an extreme overbought condition,
that indicates stock market are ready for another significant advance.
Divergence in the Rate Of Change of Price (ROC): A lower peak in the Rate Of Change of Price (ROC) against higher highs in the stock market
called negative divergence and typically it's a
Sell signal.
A higher peak in the Rate Of Change of Price (ROC) against lower lows in the stock market
called positive divergence and typically it's a
Buy signal.
To get good result with Rate Of Change (ROC) we need to use it with
other technical indicators like
Moving Average (MA)
|
On Balance Volume (OBV)
|
Percentage Price Oscillators (PPO)
|
Relative Strength Index (RSI)
|
Stochastic Oscillator (STO)
|
Commodity Channel Index (CCI)
|
Chaikin Money Flow oscillator (CMF).
When we use two or three technical indicators and in case of positive divergence and negative divergence it giving real good result, only you need to change time span and find out which is a better pair for you.