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Definition

A technical indicator which compares the price movement of a stock with that of its competitors, industry group or the entire market. This technique enables you to determine whether a share is out-performing or under-performing its sector or the market as a whole. This is distinct from J. Welles Wilder's Relative Strength Index, which compares current price movement to previous price movement of the same instrument.  This indicator can, for example, give a comparison of the price performance of a share to a market index such as Standard & Poor's 500 stock index. A relative strength is calculated by simply dividing one data stream (such as a share) by another (like the market index). The result is then charted daily or weekly. If the share rises faster than the index then the chart will rise and vice versa. Relative strength enables the investor to determine the "relative strength" of a share versus its index - or indeed any data stream versus any other data stream.

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