Relative Strength (RS)

Relative Strength (RS) is a popular technical analysis indicator used in investing and trading to compare the performance of one asset against another or against a benchmark index. It measures the price performance of an asset relative to another asset or index over a specific period.

The RS indicator helps investors and traders identify which assets or sectors are outperforming or underperforming the overall market. By comparing the relative strength of different assets, investors can identify potential investment opportunities and make informed investment decisions.

The RS indicator is calculated by dividing the price of one asset by the price of another asset or an index. The resulting ratio is then plotted on a chart and compared to a benchmark index or a moving average. If the ratio is above the benchmark or the moving average, the asset is considered to be outperforming the benchmark or the market, indicating a bullish trend. Conversely, if the ratio is below the benchmark or the moving average, the asset is considered to be underperforming, indicating a bearish trend.

Investors and traders use the RS indicator in combination with other technical analysis tools to confirm trading signals and improve their market timing. They can also use it to identify potential divergences between an asset's price performance and its relative strength, which may indicate a change in market trend.

In summary, Relative Strength is an important technical analysis indicator that measures the price performance of an asset relative to another asset or an index. It helps investors and traders identify potential investment opportunities and make informed investment decisions by comparing the relative strength of different assets.