What is Relative Strength?
Relative strength compares a stock's performance to a benchmark index or another stock, identifying which assets are outperforming or underperforming the broader market.
Relative Strength Explained
Relative strength is not the same as RSI. It's a comparison tool — if a stock is up 20% while the S&P 500 is up 5%, the stock has strong relative strength. Institutional traders and trend followers prioritize relative strength because outperformers tend to continue outperforming. It's also used for sector rotation strategies.
Real-World Example
The tech sector is up 15% YTD while the S&P 500 is up 8%. Tech has positive relative strength. Within tech, NVDA is up 60% and AMD is up 10%. NVDA has much stronger relative strength and would be preferred by relative strength traders.
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