BAJAJ FINSERV DIRECT LIMITED
Stocks Insights

Rate of Change (ROC): Definition, Formula & Importance

authour img
Nupur Wankhede

Table of Contents

What Is Rate of Change (ROC)?

The Rate of Change (ROC) is a momentum indicator used in technical analysis. It calculates the percentage change in price over a specific period.

ROC helps traders understand how quickly price is moving. A rising ROC shows strong upward momentum. A falling ROC signals weakening or negative momentum.

In Indian markets, ROC is used across stocks, indices, and derivatives. It’s available on platforms like Zerodha, Chartink, and TradingView.

Understanding the meaning of Rate of Change helps in analyzing momentum shifts.

How to Find the Rate of Change

The ROC formula is:

ROC = [(Current Price – Price n periods ago) / Price n periods ago] × 100

Variables:

  • Current Price: Latest closing price

  • Price n periods ago: Closing price from n days ago

  • n: Lookback period (e.g., 14, 21, 50)

Example:
If today’s price is ₹120 and 14 days ago it was ₹100:
ROC = [(120 – 100) / 100] × 100 = 20%

This means the price increased by 20% over 14 days.
The rate of change indicator helps traders gauge momentum and price acceleration.

How ROC Works in Momentum Analysis

ROC measures the speed of price change and is commonly observed for trend strength or reversals.

Interpretations:

  • Positive ROC: Price is rising, momentum is strong

  • Negative ROC: Price is falling, momentum is weak

  • ROC near zero: Market is consolidating

  • Sharp ROC swings: Volatile conditions

In Indian equities, ROC is observed by some traders to study breakouts and trend changes. ROC is sometimes viewed alongside RSI or MACD to add context to momentum analysis.

Choosing the Right Lookback Period

Short periods (7–14 days):

  • More sensitive

  • More noise

  • Useful in intraday or short-term trades

Long periods (36–200 days):

  • Smoother signals

  • Slower reactions

  • Suited for positional or long-term trades

Selection depends on volatility and strategy. In derivatives and rate-based setups, shorter periods are commonly used.

Applications of ROC in Trading

Use cases:

  • Detecting trend strength

  • Spotting overbought/oversold zones

  • Identifying divergence signals

Example:
Nifty shows rising price but falling ROC → bearish divergence.
This may suggest a potential reversal.

ROC can be applied to any Indian stocks such as Reliance, Infosys, HDFC etc. It is available on platforms like Chartink and TradingView. Some traders combine ROC with support and resistance to interpret signals more clearly. ROC is also observed in options trading to study momentum shifts.

Limitations of ROC Indicator

  • No fixed range like RSI

  • Can generate false signals in volatile markets

  • Sensitivity varies with lookback period

  • May lag during sideways markets

  • Often reviewed with other indicators

ROC signals are usually validated with volume or trend analysis.

Conclusion

The Rate of Change (ROC) is a momentum indicator that reflects the speed at which prices are moving over a selected period. It is often used to observe potential trend strength, reversals, or divergence patterns. While ROC can offer insights into price momentum, it is typically reviewed alongside other indicators or price levels for broader context. Since it may produce signals during volatile phases, relying solely on ROC without additional confirmation may limit decision-making clarity.

Disclaimer

This content is for informational purposes only and the same should not be construed as investment advice. Bajaj Finserv Direct Limited shall not be liable or responsible for any investment decision that you may take based on this content.

FAQs

What is the ROC formula?

ROC = [(Current Price – Price n periods ago) / Price n periods ago] × 100

No, ROC is unbounded. It can go above or below 100 depending on price movement.

It’s when price moves up but ROC falls, or vice versa—signals a possible reversal.

Yes, especially in volatile or sideways markets. Always confirm with other indicators.

ROC is typically observed alongside indicators like RSI, MACD, or volume to provide additional context.

Because it’s unbounded and varies with asset volatility. It’s not range-restricted like RSI.

View More
Hi! I’m Nupur Wankhede
BSE Insitute Alumni

With a Postgraduate degree in Global Financial Markets from the Bombay Stock Exchange Institute, Nupur has over 8 years of experience in the financial markets, specializing in investments, stock market operations, and project management. She has contributed to process improvements, cross-functional initiatives & content development across investment products. She bridges investment strategy with execution, blending content insight, operational efficiency, and collaborative execution to deliver impactful outcomes.

Academy by Bajaj Markets

eye icon 32014
share icon

All Things Tax

Navigate the tax maze with ease! Uncover Income Tax 101, demystify jargon with Terms for Beginners, and choose between Old or New Regimes.

Seasons 6
Episodes 25
Durations 1.3 Hrs
eye icon 54571
share icon

All Things Credit

Unlock the world of credit! From picking the perfect card to savvy loan management, navigate wisely.

Seasons 12
Episodes 56
Durations 3.0 Hrs
eye icon 32258
share icon

Money Management and Financial Planning

Money Management and Financial Planning covers personal finance basics, setting goals, budgeting...

Seasons 5
Episodes 19
Durations 1.1 Hrs
eye icon 15406
share icon

The Universe of Investments

Explore the investment cosmos! From beginner's guides to sharp-witted strategies, explore India's treasure trove of options.

Seasons 5
Episodes 23
Durations 1.5 Hrs
eye icon 3203
share icon

Insurance Handbook

Discover essential insights on various types of insurance in India.

Seasons 2
Episodes 6
Durations 0.5 Hrs
eye icon 4324
share icon

Tech in Finance

Welcome to Tech in Finance, where we explore the exciting intersection of technology and finance...

Seasons 1
Episodes 5
Durations 0.3 Hrs
Home
Home
ONDC_BD_StealDeals
Steal Deals
CIBIL Score
CIBIL Score
Accounts
Accounts
Explore
Explore

Our Products