Relative Candle Compares OHLC Performance Against a Benchmark

Summary

Relative Candle transforms each bar’s open, close, high, and low into a comparison with a chosen index or other symbol on the same chart timeframe. It subtracts the benchmark’s change from the instrument’s change to create relative open and close values, then plots these as a candle. Candle position and color show whether the instrument outperformed or lagged the comparison symbol during the bar. Its wick represents the difference in where each instrument closed within its own high-low range.

A background area plots a simple moving average of relative closes, with its length and visual scaling adjustable. The author presents the display as a way to distinguish an instrument-specific move from a broader market move, such as a stock falling alongside an index or rising against it. The document provides the calculation and intended interpretation, but no performance testing or evidence that the display predicts future returns. Results depend on the selected benchmark and timeframe; the relative candle is a comparison aid, not a standalone trading rule.

Key ideas

• The indicator subtracts benchmark price changes from the instrument’s changes to show relative bar performance.
• Candle color reflects relative movement from open to close, while vertical placement indicates relative gain or loss.
• The wick encodes the difference between the instrument’s and benchmark’s closing positions within their respective ranges.
• A configurable simple moving average summarizes recent relative closes.
• The display helps separate market-wide moves from instrument-specific strength or weakness, but supplies no predictive validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.