ka66: Relative Strength

28 Jan

Simple indicator that allows you to compare the price's series vs. another selected (input) series. The scale is unbounded. If it's rising, that means the chart series is outperforming the compared against series, otherwise it's underperforming it. The compared against series is usually a relevant index, e.g. marketwide like US500, or a sector series, or in the case of currencies, the DXY index.

We color code things, and have the option of adding an average line using several common averaging types.

The chart example shows how the indicator works by showing the it's movement when the AUDUSD close series is compared to the DXY close series.

If AUDUSD moves up strongly, away from/above (or towards if under) the DXY, the indicator rises upward.

If both series are roughly at the same spot, the indicator flattens.

If AUDUSD moves down strongly, away from, below (or towards if over) the DXY, the indicator falls downward.

The basic use is to confirm the validity of an up or down move on the chart, e.g. if the indicator has had 2 to 3 contiguous declines at an inflection point, then the move is likely valid.

There might be divergence signals too, but I haven't checked.