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In this video Josiah talks about using how to use the Relative Strength indicator set to inform your trading on Think-or-Swim.
The Relative Strength indicator allows you to take a top-down approach to stock selection and trading by:
A) Finding the strongest sectors in the market, based on percent change from any date, or timeframe such as YTD or month to date, etc.
B) Look for stocks with relative strength uptrends and downtrends -- situations where relative strength is not only high but it is trending higher (for longs), or low and trending lower (for shorts). If you're trying to outperform the market, you need to be in stocks that are moving faster than the market.
C) Look for divergence signals and relative strength breakouts:
- Signs of strength:
-- Relative to highs:
--- Stock makes a new high but market doesn’t
--- RS makes a new high but market doesn’t
--- RS makes a new high but stock doesn’t
-- Relative to lows:
--- Stock makes a new low but RS doesn’t
--- Market makes a new low but stock doesn’t
--- Market makes a new low but RS doesn’t
-- Breakouts:
--- RS breaks out to a new x-period high
- Signs of weakness:
-- Relative to highs:
--- Stock makes a new high but RS doesn’t
--- Market makes a new high but stock doesn’t
--- Market makes a new high but RS doesn’t
-- Relative to lows:
--- RS makes a new low but stock doesn’t
--- RS makes a new low but market doesn’t
--- Stock makes a new low but market doesn’t
-- Breakdowns:
--- RS breaks down to a new x-period low
DESCRIPTION:
The Thinkorswim Relative Strength Divergence Indicator set includes several different tools for evaluating relative strength and weakness between an individual charted symbol and an index, or between multiple sectors and indices.
Relative strength is just the stock price divided by an index price, usually done with the closing prices of each and plotted as a line graph. This is useful, because it can show you when a stock is being aggressively bought or sold enough to keep it stronger or weaker than the average during a rally or sell off. But it can be taken much further.
A relative strength graph that is trending upward can be very powerful, because it indicates that the stock is consistently being accumulated more aggressively than other stocks in the index you’re comparing against. An uptrend in Relative Strength is quantitative evidence that a stock is under strong accumulation, at the very least more so than other stocks in the index, and that is exactly the kind of stock you want to have in your portfolio if you expect to outperform the market in any way. After all, how can you expect to outperform the market if you’re getting involved in stocks that are moving up slower than the average itself?
The tools in this set allow you to identify general relative strength in terms of an RS uptrend, defined by custom moving averages. You can set the average types and lengths and color coding methodology. You can also look for periodic relative strength based on how the stock has moved relative to the index during any of 5 custom time frames, such as during the current day, week, month, quarter, or year, or any other built in time frames you change them to (note: this must be greater than or equal to the chart’s own time frame though). In addition, there are multiple relative strength divergence signals and breakout signals built into the system which allow you to focus in on certain occurrences happening on the current bar, such as the market making a new 5 period low but the stock not following suit.
I originally started developing this system from curiosity for my own trading where I was working to implement my own version of CANSLIM investing after the manner of William J. O’Neil + Co. and Investors Business Daily. I started with the built in RS study in TOS, but realized a lot more could be gained by plotting the ratio as OHLC candles or bars, and adding features like MAs, 52 week breakouts, multiple types of divergences over custom timeframes, etc. Those changes evolved into this indicator set and I think you’ll be really impressed by the possibilities here.
DISCLAIMER: WE ARE NOT CERTIFIED FINANCIAL ADVISORS AND NOTHING ON THIS VIDEO OR PAGE OR CHANNEL IS AN ADVERTISEMENT OR RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, AND NEITHER ARE ANY OF THE PRODUCTS OR CONTENTS OF THIS CHANNEL OR VIDEO OR PAGE OR SITE INTENDED TO INSTRUCT YOU ON HOW TO MAKE TRADING OR INVESTING DECISIONS. Use of this information constitutes acceptance of our terms and conditions which are available here: [ Ссылка ]
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