19 THE CONCEPT OF RELATIVE STRENGTH

The Concept

Relative strength (RS) is a technical concept that measures the relationship between two securities. It’s important to note that relative strength as we will be using it here has nothing to do with Welles Wilder’s relative strength indicator (RSI), which is discussed in Chapter 14.

The concept explained here is comparative relative strength, where the price of one security is divided by that of another. The result is then plotted as a continuous line whose trend is then analyzed. There are several ways in which relative strength can be used:

1. To compare one asset class to another in order to decide which one to buy, or to better understand an intermarket relationship. For example, we might compare ...

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