Smart Relative Strength Can Remove False Signals

Relative strength is one of the most useful indicators in the market, highlighting when stocks and sectors are outperforming or underperforming a broader index.

Traditional RS compares the percentage change of one symbol over a given time frame and subtracts the percentage change of the S&P 500 over the same period.

This is handy, but it can produce false signals at times of volatility . For example, when the broader market is crashing, certain sectors may “outperform” simply by falling less than the S&P 500 .

Smart Relative Strength addresses this shortcoming by requiring that the symbol’s absolute AND relative returns both be positive. Otherwise a zero is returned.

This was useful last week on the Dow Jones Transportation Average . Using simple relative strength , it had its best one-week performance against the S&P 500 since October 2008. This was obviously a false signal because October 2008 was a time that everything else was crashing.

Smart Relative Strength showed that, excluding periods of overall decline, DJT had its best week since January 2008.

Note: This chart uses a 1-period interval, while the code defaults to 21 periods.
Skrip sumber terbuka

Dalam semangat TradingView yang sebenar, penulis skrip ini telah menerbitkannya dengan menggunakan sumber terbuka supaya pedagang-pedagang dapat memahami dan mengesahkannya. Sorakan kepada penulis! Anda dapat menggunakannya secara percuma tetapi penggunaan semula kod ini dalam penerbitan adalah dikawalselia oleh Peraturan Rumah. Anda boleh menyukai skrip ini untuk menggunakannya pada carta.

Ingin menggunakan skrip ini pada carta?


pls guide how to plan entry and exits according to this indicator
+15 Balas
How to get RS indicater
+12 Balas
lawleshmca pkindu2013
@pkindu2013, how to get rs
+1 Balas
How to select the perfect period for analysis?
+6 Balas
Nice idea!
+2 Balas
Thanks for sharing.
+1 Balas
Thanks for the info. Very interesting.