Trading Tutorial – Comparative Relative Strength - RPW Traders

Trading Tutorial – Comparative Relative Strength

Comparative Relative Strength (or CRS for short) is an indicator that compares two symbols. It is a ratio indicator.

CRS is based on an assumption the current strongest symbols will continue to be stronger in the near future AND / OR the current weakest symbols will continue to be weaker in the near future given no material effect to the symbol DURING THE NEAR FUTURE.

So what does this mean for us...

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Comparative Relative Strength Overview

Summary:

  • Comparative Relative Strength is a ratio indicator that aims to identify the strength or weakness of a symbol when compared to another symbol. 
  • There are many ways to calculate a CRS indicator starting with the basic CRS = price of symbol #1 divided by the  price of symbol #2
  • CRS analysis has a number issues that you need to be aware of, such as different lookback periods, outdated analysis and the problem when trying to analyse high volatility symbols
  • However, we believe our trading is benefited by using CRS and we go through a couple of examples of our trading charts with our proprietary CRS indicator.
  • Finally we show you how you can start testing CRS using online software, data and sample CRS code - all without spending a lot of money.

Tutorial Overview

1) What is Comparative Relative Strength

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The first part of the webinar is dedicated to explaining what is Comparative Relative Strength. CRS Is an indicator that compares two symbols. That makes it a type of ratio indicator.

Its aim is to find symbols that are either strong or weak and CRS is based on an assumption the current strongest symbols will continue to be stronger in the near future AND / OR the current weakest symbols will continue to be weaker in the near future given no material effect to the symbol DURING THE NEAR FUTURE

2) Comparative Relative Strength Formulas

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There are many ways to calculate CRS. In the video I will show you 1 option and how to start using it. On the slide above you can see that one option to calculate CRS is by any symbol at today’s price divided by the index at today’s price.

Generally the prices are both close prices but you can test other values. So here is a chart with the 2 symbols and the CRS formula

In the top panel is a chart of Aristocrat Leisure or ALL-ASX
In the middle panel is a chart of ASX 200 or XJO-ASX
In the lower panel is the Comparative Relative Strength indicator

That CRS blue line is just close of Aristocrat divided by the close of ASX 200

3) ​Issues with Comparative Relative Strength

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We use CRS because it shows us strength and weakness. It is an important part of our trading and investing toolbox but there are some issues with CRS you need to be aware of. Issues such as:

  • Different lookback periods
  • Outdated analysis
  • Using high volatility symbols

4) How We Use Comparative Relative Strength

rpw-traders-comparative-relative-strength-how-we-use-CRS

We use a custom modified Strength Indicator. It calculates the strength of the Symbol vs the strength of the index automatically. And we usually plot it as a PLUS – MINUS Indicator to make it easy to visualise on a chart.

  • Plus 1 = Strong Bias
  • Minus 1 = Weak Bias

5) Start Testing Comparative Relative Strength

rpw-traders-comparative-relative-strength-how-to-test-crs

In the final section, we go over how you can start testing CRS. You need to test as CRS analysis may or may not suit you and your trading style. We look at where to go for online software, data and CRS code. Then we look at 2 possible ways you might want to test on how to implement Comparative Relative Strength analysis.

Are You Getting The Results You Want?

RPW-Traders-real-trade-details

Are you new to trading or investing? Possibly you have been trading or investing for a while but not getting the results you want.

Then have a look at what we do. We trade Share CFDs with End of Day daily data and using our proprietary comparative strength and seasonal analysis. We also invest in ASX shares with End of Day weekly data and combine both fundamental analysis and technical analysis.

Each report has a $7 trial for 1 month for first time subscribers. Click the buttons below for more information. 

About the Author

Paul Lightbody is the founder of RPW Traders. He has been trading and investing for over 20 years, specialising in combining seasonal and comparative relative strength analysis. When he isn't researching or trading the markets , he likes to get out of the office and get to a rugby game or strap on a tank and go scuba diving.