Relative Strength Comparison
The Relative Strength Comparison (RSC) is a basic indicator that plots a comparative measure of strength of one security versus another (the base security). It can direct traders to strong securities and help to identify the weak ones. It is calculated by dividing the price of the security (numerator) by the price of the base security (denominator). When it goes up, the security outperforms the base security. When it goes down, the base security outperforms the security. When it moves sideways, both prices are rising and falling equally percentagewise. Outperforming in this context does not necessarily mean the security is rising, it could be falling less than the base security: the indicator only describes the relationship between the two securities. Traders often use it to compare the strength of a stock against an index, but it can also be used to compare different asset class indices to find a strong market. The indicator is best used in combination with other analysis techniques.