About this indicator: This indicator goes under many different names such as Relative Strength Ratio, Comparative Strength, Relative Strength Comparison (RSC) etc. It compares the strength of the current asset to another asset of your choice and displays the relative strength of the current asset. (Not RSI) There are several comparative indicators published already here on TV but I have added some unique features that I think is really useful.
When to use it: This is useful when you want to compare for example a stock with its sector to find out if the stock is a leadership stock in that sector or main index. You could also use it to compare the sector to its index etc.
If you want to compare for example a stock to both its index and its sector at the same time I suggest you add 2 instances of this indicator.
In many trading systems you are supposed find the strongest tickers by identifying "layers of strength" like 1. The strongest asset class that money is flowing into (like stocks, commodities, bonds, etc.) 2. Find the strongest sectors. 3. Find the stocks outperforming those sectors. 4. Find some kind of entry signal there.
How it works: The indicator calculates an "RS line" (Relative Strength) by dividing the current ticker with a ticker of your choice. This creates a ratio or pair similar to how currencies are related to each others like USDGBP (dollar against pound). The RS line is black by default so you might want to change its color if you use a dark theme. If the RS line is moving up it means your current asset is stronger than the asset you are comparing it with and vice versa.
Use the simple moving average to quickly see long term strength trends.
Features
RS line Shows the relative strength of the current asset.
SMA This Simple Moving Average has directional coloring; green when it is angled up and red when it is angled down. You can customise the period in the settings. If you don't want the color change just make both up/down color the same.
Relative market label This displays the market you are currently comparing with as a label next to the last data point. Because I tried stocks in 2 different countries I want to know which index I am comparing with and this label saves me from going into the settings to check. I find it to be a life saver!
Please let me know if you find any problems or if you have any ideas for improvement
nice one, would like to have centre line at zero , SMA changing colour when decreasing & increasing is good, can we include the reals RS also in to this
colicoid
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@CHARTWAVEZ, Thanks. This calculation does not often oscillate around zero, as it is the relation of two arbitrary ticker values relative to each other and not relative to zero, so I'm not sure that it would make sense to have a zero line. It could be made into an oscillator but I find I loose some visual precision in that and prefer this setup. One idea would be to take the High/Low for a certain number of periods back and divide by 2, like the Kijun line of ichimoku. That would get you closer to something of a zero line. Don't know if would be more useful than the moving average though. Can you please clarify what you mean by "reals RS"?
cuong88icm
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SMA is the Simple Moving Average of my ticker ? or it is Simple Moving Average of the ticker of the asset we are comparing with ? what it the suitable SMA that you use ? 69 ? Thanks
colicoid
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@cuong88icm, The green/red line is by default 63 period SMA of the RS (current ticker / the comparative instrument in the settings). It is meant to give you an idea of the relative strength over roughly a quarter. This is because it takes time for large players to rotate in/out of an asset. At least according to rumor the large funds do this over a three month period. They can't just do it all at once or it would show up very clearly in the charts...
lin6low5
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Nice!!!!!!!!
colicoid
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@lin6low5, Thanks. Btw. I found a very helpful video on how to use interpret RS on YT here: youtube.com/watch?v=pDyv3ArF4iU in case anyone want to drill down into using it properly.
omnihilus
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@colicoid, many thanks for the script, explanations and video!! :)