The Rate-of-Change indicator is momentum in its purest form. It measures the percentage increase or decrease in price over a given period of time. Think of its as the rise (price change) over the run (time). In general, prices are rising as long as the Rate-of-Change remains positive. Conversely, prices are falling when the Rate-of-Change is negative. ROC expands into positive territory as an advance accelerates. ROC dives deeper into negative territory as a decline accelerates. There is no upward boundary on the Rate-of-Change. The sky is the limit for an advance. There is, however, a downside limit. Securities can only decline 100%, which would be to zero. Even with these lopsided boundaries, Rate-of-Change produces identifiable extremes that signal overbought and oversold conditions.
Source: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:rate_of_change_roc_a
Source: http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:rate_of_change_roc_a
