Rate of Change (ROC): Indicator Guide
Rate of Change, or ROC, is the percent a price has moved over the last N days, where N is the period you choose (12 by default). A positive reading means the price is higher than it was N days ago and a negative reading means it is lower. It is a plain way to see how fast a stock is traveling, and it does not say how long the trip will last.
What It Shows
ROC compares today's close with the close 12 days ago and shows the difference as a percentage. Zero means no change. A reading of +10 means the stock gained 10% over the window, and a reading of −5 means it lost 5%.
Because it is a plain percent change, ROC is easy to compare across stocks of any price. In made-up numbers, a $20 stock and a $500 stock can both read +10, even though their dollar moves are very different.
How It's Calculated
Subtract the close from N days ago from today's close, divide by the close from N days ago, and multiply by 100. The default window is 12 days. Each new day, the comparison point moves forward by one day.
Worked example with made-up prices: a stock closed at $50 twelve days ago and closes at $56 today. (56 − 50) ÷ 50 × 100 = 12. The ROC is +12.
Only two prices go into the answer: today's close and the close from N days back. Everything in between is ignored.
How to Read It
Here are three readings. Each describes speed and none predicts what happens next.
- Rising or falling. A rising ROC means momentum is building. A flat or falling ROC means the move is stalling, even if the price is still higher than before.
- The zero line. Crossing the zero line means the price has moved from below to above its level N days ago, or the other way around.
- Divergence. When price makes a new high but ROC does not, the move is running with less speed. This is called divergence. It is a reason to look closer, not a prediction.
Where It Misleads
ROC depends on the one price from N days ago. If that single day was unusually low or high, the reading is distorted, and it shifts sharply on the day that price leaves the window.
ROC also measures speed, not staying power. A high reading says a stock moved fast, not that it will keep going.
Settings in Rapunzl
| Setting | Default | Range |
|---|---|---|
| Period | 12 | 1 to 400 |
Period is how many days back to compare. A short period such as 5 reacts to recent bursts and is noisy. A long period such as 50 smooths the reading and describes the bigger trend. Candles are the unit here: on a chart with 30-minute candles, a period of 12 looks back 12 candles instead of 12 days.
Try It in Rapunzl
Open any stock's chart in Rapunzl, then go to Customize Chart → Chart Indicators → Advanced Indicators and add Rate of Change. It uses closing prices only, so it also works on a line chart. The study draws in its own panel around a zero line. Try 12 days first, then 5 and 50. On the chart, Rate of Change needs Rapunzl Premium.
"Small companies, rising" in Rapunzl's Stock Scanner lists company stocks worth $300 million to $2 billion that are in an uptrend and gained 10% or more in the last 12 trading days, which is a ROC 12 of 10 or more. "Rate of change 12" is also a field in the Momentum group, free to use, so you can filter or sort by it in any idea.
A 15-Minute Class Activity
Sort the Race Cards. Students work in pairs with a calculator and three index cards each. All prices below are made up.
- 3 minutes. On the board, write three made-up stocks with their price 12 days ago and today: A went from $20 to $22, B from $200 to $210 and C from $50 to $48. Pairs copy one stock onto each card.
- 5 minutes. Pairs first sort the cards by dollar change, biggest gain first. Then they calculate each ROC and write it on the back of the card. The answers are +10% for A, +5% for B and −4% for C. They sort the cards again by ROC.
- 4 minutes. Compare the two orders. B moved the most dollars but A had the highest ROC. Ask why a percent is the fair way to compare the three.
- 3 minutes. Exit ticket: which stock moved fastest in percent, and why is that not the same as the biggest dollar move?
Related Indicators
- MACD: another momentum read, built from two moving averages.
- RSI: a 0 to 100 momentum study based on recent gains and losses.
- Commodity Channel Index: momentum measured against a stock's own typical variation.
- Moving averages: smooth many closes, where ROC compares just two.
Frequently Asked
Questions
It tells you the percent a stock's price has moved over the last N days. Positive means higher than N days ago and negative means lower.
Today's close is 10% above the close from N days ago. On the default 12-day setting, the stock gained 10% over those 12 days.
A percent puts stocks of any price on the same scale. A $2 move means more to a $20 stock than to a $500 stock, and ROC shows that.
The price has moved from below to above its level N days ago, or the other way around. It marks a change in where the price sits compared with that day, not a forecast.
The "Rate of change 12" field in Rapunzl's Stock Scanner is free. The ROC chart study is part of Rapunzl Premium.
Teach Speed Versus Size With Rapunzl
Request a demo to watch Rapunzl work in a classroom like yours, then point any parent who wants a student to try indicators at home to our parents page.
Indicators, patterns and examples in this article are for education and are not investment advice or a recommendation to buy or sell any security.
By Maria Rodriguez, Curriculum Designer at Rapunzl.