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Relative Strength Ranking
Definition:
Relative Strength Ranking (RSR) is based on the idea that most successful stocks must rank well as compared to the overall market based on several criteria. RSR measures the perfromance of a stock based on the past year's worth of data. Relative Strength Ranking is measured on a scale of 0 to 100, where each number can be considered a performance percentile out of all available individual stocks in the market.
Interpretation:
Relative Strength Ranking can be used as part of an overall selection criteria for purchasing new stocks, and as verification for a stock that has limited potential for a major price advance. Many of the biggest price advances in recent history have been for stocks with an RSR topping eighty.
- Choose leading stocks with high RSR.
- Avoid laggard stocks with low RSR.
