Does Fixed Income Follow Momentum And Relative Strength?

Do you know that relative strength tin aid us in trading in stronger stocks? Yes! You heard information technology right. Relative Strength is a momentum strategy that helps u.s.a. in identifying potent stocks for trading as compared to the Index. With the help of Relative Strength, traders will wait for those companies which take outperformed their peers or the index either past rise more or falling less equally compared to the peers or alphabetize.

Relative strength helps us in predicting that the trends currently displayed by the stocks will continue for long enough and we tin can realize a positive return. However, traders should note it is different from the Relative Strength Index.

So, without further delay let us empathize what is meant past Relative Force and how nosotros can trade with it:

Table Of Contents

What is Relative Strength (RS)?
- Beta and Alpha? Why are we talking about them here?
Calculation of Relation Strength
How does Relative Strength work?
Trading with Relative Strength using StockEdge
Difference between Relative Strength and Relative Strength Index
Webinars on Relative Force:
- ane. Become A BLAZING TENDULKAR WITH RS-
- 2. Identify MASTER-BLASTER STOCKS WITH RS-
- iii. SYSTEMATIC TRADING USING RELATIVE Forcefulness/MOMENTUM-
- 4. CROSSOVERS & RELATIVE STRENGTH-
- 5. TRADING STRATEGY USING "RELATIVE Cost THEORY"-
Watch our video on Relative Strength past Mr Vivek Bajaj
Bottomline

What is Relative Strength (RS)?

Relative Strength refers to the measurement of the stock'southward performance as compared to its benchmark or some other stock. RS compares the performance of stock "Ten" vs "Y", measured over a menstruation. For case, "Ten" may increment more or less than "Y" in a rising market place or "X" may fall more than or less as compared to "Y" in a falling market. Information technology is ane of the tools for momentum investing.

This measure helps us in identifying both the strongest and the weakest securities or any nugget classes within the financial market place. Commonly, the stocks which display strong or weak RS over a given time menses tend to keep going forward. One should annotation that RS analysis can be applied to whatsoever domestic or international stocks, stock indexes, fixed income indexes, currencies, commodities, and any other asset classes.

You must have heard about beta and blastoff when studying statistics in schoolhouse? If not, allow u.s. epitomize these concepts in this context. Don't worry we won't exist also statistical!

Beta and Alpha? Why are we talking most them here?

Beta is a measure of volatility relative to a benchmark, and it's really easier to talk about beta first. It helps usa in measuring the systematic risk of a security or a portfolio compared to an index like the Nifty 50.

Whereas the Alpha is the backlog return on an investment or a stock later on adjusting for market-related volatility and random fluctuations. Alpha is 1 of the major risk direction indicators when it comes to analyzing mutual funds, stocks, and bonds. In a sense, it tells investors whether an nugget has consistently performed better or worse than its beta predicts. So alpha more than 0 ways that a stock has outperformed and less than 0 ways that a stock has underperformed after adjusting for volatility.

One should note that the high beta stocks would be more than profitable simply are likewise riskier. The high beta stocks could also accept a negative alpha which means that although more volatile their trends compared to the Nifty50 could be down. So when blastoff is compared among the stocks it provides us with a relative forcefulness measure and stock lists tin can be ranked past alpha to show which stocks are the strongest.

Calculation of Relation Forcefulness

Now let united states come up to the calculation of RS. RS is calculated past using the below formula for comparing a stock'south price change to a change in index prices.

RS= Stock's Price / Alphabetize's Toll

For computing the RS of 1 stock to the another where North is the showtime stock and N2 is the stock we are comparing information technology to is equally beneath:

RS= N Stock's Toll/ N2 Stock's Price

One should annotation that the period of both the assets should be the same such every bit ane day or one year.

How does Relative Strength work?

Now that we take understood what RS actually means and how we can calculate the aforementioned, permit usa discuss how we can trade stronger stocks using RS with the help of an example-Reliance Republic of india Ltd.

In the in a higher place daily chart of Reliance Republic of india Ltd. We accept plotted the RS line compared to Nifty l of the last 55 periods.

One should note that when the RS line crosses higher up 0 then we can say that the stock is outperforming the index and when it crosses below 0 the stock is underperforming the index. So, from the to a higher place chart, nosotros can see that on 24^th March, how the RS line crossed the 0 line when the bullish stage of the stock started. This shows that the stock is getting strong and outperforming the index equally the prices are moving upwardly. Traders can ride the trend and gain profits till the RS line goes beyond the 0 line.

One should likewise note that traders should besides apply other technical indicators such as supertrend, moving average, book etc. along with the RS line. As well using point and figure charts will aid the traders to filter out racket in the marketplace.

Merely the question comes how we identify the stocks that crossed the 0 line and are either outperforming or underperforming the index or the sectors. For that, nosotros tin have the help of StockEdge.

Trading with Relative Strength using StockEdge

StockEdge helps usa in filtering the stocks which are either outperforming or underperforming the index or the sectors and other Relative Strength scans as shown below:

For instance, the Strongly Outperforming Benchmark Index scan gives u.s. the list of the stocks that have RS>0.1 and denotes that the stocks are outperforming the index.

After clicking on this scan, we go a list of the stocks outperforming the index equally shown beneath:

Thus, with the help of these scans, we can hands identify those stocks that are either outperforming or underperforming the index or sector in the last 55 days.

Departure between Relative Force and Relative Force Index

Every bit we said at the outset that RS is unlike from RSI. Relative Strength Alphabetize (RSI) is a momentum indicator that measures the magnitude of recent price changes for evaluating overbought or oversold weather in the price of a stock or other asset.

The principal difference between relative strength and RSI is a difference of perspective. The relative strength tells us about the value of a stock in comparison to another stock, index or sector, whereas the RSI tells about the performance of a stock in comparison to the contempo performance of the same stock.

Webinars on Relative Strength:

You lot can learn more about Relative Forcefulness by watching our webinars conducted by the marketplace experts:

i. Go A BLAZING TENDULKAR WITH RS-

Ane tin exist successful in trading the stock markets if he has a strong understanding of price motility. Price tin give the best probable direction. This webinar conducted by Mr. Premal Parekh volition assistance the traders to place stock ideas that have the highest chance of success. It volition discuss in detail the concepts of Relative Strength, Adaptive Relative Strength & Comparative Relative Strength. Participants will be able to analyse stocks with ease and build conviction for scaling up with trends & initiate larger positions.

2. Place MASTER-BLASTER STOCKS WITH RS-

This unique webinar conducted by Mr Premal Parekh will help the states in agreement the concepts of Relative Strength, Adaptive Relative Strength & Comparative Relative Strength. Concepts that clearly define baseline rules of Economics – Identifying Demand & Supply.

Learning of these concepts volition help the traders to find Master BLASTER stocks that consistently outperform the Benchmark Nifty 50. Participants will exist able to analyse stocks with ease and build conviction for scaling upwardly with trends and initiate larger positions.

3. SYSTEMATIC TRADING USING RELATIVE STRENGTH/MOMENTUM-

This webinar on systematic trading using Relative Force/ Momentum conducted by Mr Vivek Gadodia volition help the traders to understand How to identify the strongest stocks? It will also assistance them to understand how to create a basket of stocks and allocate uppercase, Rebalancing stocks and besides Managing Hazard.

four. CROSSOVERS & RELATIVE Force-

This webinar on crossovers and relative strength conducted by Mr Dinesh C Nagpal volition help y'all gain knowledge about the amalgamation of Dow Theory with a modified Relative Strength as the catalyst for momentum-driven trades.

5. TRADING STRATEGY USING "RELATIVE Price THEORY"-

Trading is a science that needs a strong understanding of price motility. It is a widely accepted theory in trading that cost is God. Why spend so much fourth dimension on other facets when the toll tin give yous the best probable management. This webinar on Trading Strategy using Relative Price Theory will equip the participants with the process of identifying stock ideas that accept the highest chance of success.

Watch our video on Relative Forcefulness by Mr Vivek Bajaj

Bottomline

1 should note that trading with relative strength requires a strategy. Traders should not just randomly buy a strong stock. They still demand to follow a trading plan which defines how and where they can enter, how to control hazard, position size, and as well how to exit the stock. Relative strength gives us an thought of trading in stronger stocks. We promise that you establish this weblog informative and use the data to its max potential in the practical world.

Nosotros hope that you establish this blog informative and use the data to its maximum potential in the practical globe. Show some love by sharing this web log with your family and friends and aid us in our mission of spreading fiscal literacy.

Happy Trading!!