The Rate of Change is a momentum indicator. It measures the percentage change between the current price and the price a specific number of periods in the past.

This indicator is commonly used to spot trading opportunities based on divergences and changes between positive and negative momentum. In order to detect the sentiment change of the price, the ROC separates positive and negative regions to generate signals.

In this way, when it crosses from negative to positive, the indicator suggests that the momentum of the price is increasing and signals a buy. On the other hand, when it goes from positive to negative the opposite happens, and it generates a sell signal.