Relative Strength Rank Normalized by Average True Range

Summary

The document presents a relative strength ranking indicator for comparing stocks, ETFs, or futures within a chosen universe. It combines short- and long-term price movement relative to moving averages, averages those components, and divides by a 10-day Average True Range. This volatility adjustment aims to make scores more comparable across instruments. Traders can rank the resulting values and use the highest-ranked instruments in a momentum-oriented system. The example settings use a 20-period short average and a 140-period long average.

The supplied indicator also tracks whether the score is rising or falling and displays positive and negative regions differently. The material explains the calculation and its intended use but provides no empirical test, benchmark, evidence of predictive performance, or rules for portfolio construction and rebalancing. Rankings depend on the chosen universe, price series, lookback periods, and indicator implementation, so the score alone does not establish that an instrument will continue to outperform.

Key ideas

• The indicator ranks instruments by combining short- and long-term price movement.
• It scales the combined measure by Average True Range to account for volatility.
• The example uses short and long lookbacks of 20 and 140 periods and a 10-period ATR.
• The score can support cross-sectional selection in a momentum system.
• The document does not provide performance tests or portfolio rules.

Tags

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