The rate of change (ROC) is a technical analysis tool that measures the percentage change in price between the current price and a certain period in the past. This tool is often used to identify trends in price movement in financial markets and to determine the strength of those trends.

The ROC formula is as follows:

ROC = (Current Price - Price n periods ago) / Price n periods ago x 100

Where n represents the number of periods, such as days or weeks, used to calculate the rate of change.

When the ROC is positive, it indicates that the current price is higher than the price n periods ago, and when it is negative, it indicates that the current price is lower than the price n periods ago. Traders use the ROC to confirm trends and to signal potential buy or sell opportunities.

For example, if the ROC indicator shows a positive value, it suggests that the stock price is trending upwards. This is because the current price is higher than it was n periods ago. Conversely, if the ROC is negative, it suggests that the price is trending downwards.

Traders may also look for divergences between the ROC and the price movement to identify potential trading opportunities. A bullish divergence occurs when the price is making lower lows, but the ROC is making higher lows. This divergence suggests that the price may soon reverse and move higher. On the other hand, a bearish divergence occurs when the price is making higher highs, but the ROC is making lower highs, suggesting that the price may soon reverse and move lower.