Advanced Charting Techniques for High Probability Trading: The Most Accurate And Predictive Charting Method Ever Created

CHAPTER 10

RS: Advanced Charting Relative Strength Indicator

The relative strength (RS) indicator was presented at the 2010 Compound Stock Earnings Masters Seminar, It was tested and back-tested for months with hundreds of stocks prior to that presentation.

Earlier in this book, we reviewed and discussed four phases of a cycle: birth, momentum, exhaustion, and death. Understanding these four phases and correct chart interpretation increases the probability of correct entry and exits of trades.

Advanced Charting is continually searching and testing indicators to improve its accuracy. The strength or weakness of a stock relative to the overall market is an important indicator of market direction and momentum.

If the indices are moving lower or down, but the stock you are interested in trading is holding steady or moving up, ask yourself: Does this stock have strength? If indices are moving higher or up, but the stock you are interested in trading is holding steady or moving downward, ask yourself: Does this stock have weakness?

The movement of the indices up or down with your stock moving against that direction or in the opposite direction is valuable data to apply to your trading.

Relative strength compares one thing to something else. RS is dependent on something else for significance. It is a measurement of a price cycle that indicates how a stock is performing relative to other stocks in its industry. The calculation divides a stock’s price performance by the price performance ...