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Investors around the globe need to compare investments to determine
which investments are making more money at any given instant. The
most common yardstick is the SP500 Index. This means that other
investments are compared to the SP500 by comparing their percentage
changes. If an investment changes 20% more than the SP500 then its
ratio would be 120% (1.20). If the investment loses 20% as compared
to the SP500 then its ratio would be 80% (0.8). Relative Strength
measures how the investments are doing relative to the SP500 Index.
Basically, the idea is to identify those investments that are HOT.
Regardless of why, you will know ahead of the gibbering hordes by
being able to find the best performing investments just like a PRO.
But it does require that you do your homework before investing,
i.e., find out why the investments are hot before you commit your
money, ie., having a clear understanding of the macro economic
environment is very important to determine the portfolios sector
weighting, combined with detailed analysis and selection of superior
investment opportunities which demonstrate a combination of the
following characteristics:
superior cash flow and earnings growth
low price-earnings and cash flow multiples
sound business models
strong management teams
undervalued securities in favorable macro economic sectors
taking into account:
size: Market Capitalization
liquidity: Current Ratio, Working Capital
solvency: Debt-to-Equity Ratio
efficiency: Gross Margin, Total Asset Turnover
profitability: Earnings Per Share, Forecasted Earnings Growth,
Dividend Yield, Net Profit Margin, Operating Margin, Return on Assets
stock Price: Price to Book Value, Price to Cash Flow, Price Sales
Ratio, Price Earnings Ratio
rgds, Pal
--- In amibroker@xxxxxxxxxxxxxxx, "Ara Kaloustian" <ara1@xxxx> wrote:
> Terry, Steve,
>
> Thanks for your responses ... RelStrength() then is simply a
ratio of
> closing prices (Close multiplied by a constant: 1000/index)...
>
> This means that when you compare 2 issues the ratio of their
RelStrength()
> is simply the ratio of their prices.
>
> RS1 = C1 * 1000/Index;
> RS2 = C2 * 1000/Index;
>
> Therefore RS1 / RS2 = C1/C2
>
> How does this help compare stregth of a particular issue ... and
trading
> decisions?
>
> What am I missing?
>
> Should I be using RSI as the comparison:
> RS1 = RelStrength(RSI(stock1,periods))
> RS2 = RelStrength(RSI(stock2,periods))
>
> Ara
>
>
>
>
> ----- Original Message -----
> From: "Terry" <MagicTH@xxxx>
> To: <amibroker@xxxxxxxxxxxxxxx>
> Sent: Sunday, October 03, 2004 11:34 AM
> Subject: Re: [amibroker] Relative Strength
>
>
>
> It divides the selected symbol by the SPX and mulitplies by 1000.
Divide
> SPX/SPX *1000 = 1000
>
> Basically itıs used to compare your selected symbol to the S&P500.
> --
> Terry
>
>
> From: "Ara Kaloustian" <ara1@xxxx>
> Reply-To: amibroker@xxxxxxxxxxxxxxx
> Date: Sat, 2 Oct 2004 21:57:31 -0700
> To: "AB-Main" <amibroker@xxxxxxxxxxxxxxx>
> Subject: [amibroker] Relative Strength
>
> Would some kind soul explain the RelStregth() function.
>
> RS = RelStrength( "!SPX") ;
>
> Plot(RS,"RelStregth",colorBlue,styleLine|styleThick);
>
> I am using the code above as a test.
>
> I observed the following:
>
> 1. When I select "!SPX", the result plotted is 1000
>
> 2. When I select any other symbol, the result ranges from 1 to
about 35.
>
>
>
> I used "ABFS" to look in more detail with last data point on
10/1/04:
>
> SPX price change = +16.92 (or 1.518%)
>
> ABFS price change = + 1.53 (or 4.178%)
>
> The result of RelStregth for ABFS was 33.7163 and is constant (a
flat line
> on chart) across all dates
>
> The results remain the same regardless of what date I select or
look at
> daily, weekly or monthly chart.
>
> Would someone explain exactly what RelStrength does?
>
>
>
> Thanks
>
> Ara
>
>
>
>
> [Non-text portions of this message have been removed]
>
>
>
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>
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