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OmniTrader 2013 Technical Support
DSS & RS
Last Activity 9/16/2017 11:23 AM
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JamesR

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Subject : DSS & RS
Posted : 11/21/2013 9:41 AM
Post #29148

I have been revisiting DSS recently and got a bit confused over the use of the Relative Strength (RS) Ranking method.

From what I can tell, RS is simply the price of the stock divided by the price of the base symbol.

OK - but for a ranking method how does that work - if I rank descending, and use the same base symbol (e.g. the FTSE 100) then surely those stocks with the higher prices will always rank higher?

However, I note there are actually 4 potential parameters in the RS (Intellisense shows these when you type into formula builder) and those parameters are

Data, Period, Symbol, Unit

The following post explains some of this

http://www.omnitrader.com/currentclients/otforum/thread-view.asp?threadid=3848&forumid=43&MessageID=14765

But doesn't mention the fourth (DATA) parameter - what is that - or better still, is there a reference anywhere that lists all of these parameters and describes the indicators - the basic help and Intellisense list them but don't explain them.

Maybe then I could work out how RS can be used to rank different stocks in DSS!

Many thanks as always - holding off loading that OT 2014 until I sort this one out!!!!


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Barry Cohen

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Subject : RE: DSS & RS
Posted : 11/21/2013 10:42 AM
Post #29149 - In reply to #29148

The Relative Strength comparative indicator compares two securities to show how the securities are performing, relative to each other. Comparative Relative Strength is calculated by dividing one security's prices by a second security's price. This shows the relationship between the two securities. This indicator should not be confused with the Relative Strength Index, which was invented and named by Wells Wilder.

This indicator offers insight into a security's bullishness or bearishness. If the indicator is increasing, it means that the stock is increasing in value faster than the market. If the indicator is decreasing, the stock is decreasing in value faster than the market. Generally, it is best to buy a stock when the Relative Strength indicator is increasing.

The DSS Relative Strength ranks long trades based on the stocks that have the highest Relative Strength compared to the index. Short trades ranks based off of the lowest relative strength. Longs are sorted in descending order and shorts are sorted in ascending order.

The Data parameter refers to open (O), high (H), low (L), close (C), or volume (V). By default RS uses Close or C. For instance, RS(7,"$SPX",1) is the exact same as RS(C,7,"$SPX",1) so you could base it off the open if you wanted to by using the letter O for open.

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Steve Luerman

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Subject : RE: DSS & RS
Posted : 11/21/2013 10:56 AM
Post #29150 - In reply to #29148

James,

I agree with your analysis of the problem with the RS calculation in DSS. I came to the same conclusion, that the default RS calculation is not normalized. It does favor high priced stocks over low priced stocks. I concluded that I will need to create my own RS indicator to normalize the calculation to properly rank stocks by RS regardless of their price.

Unfortunately, I haven't done that yet.
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JamesR

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Subject : RE: DSS & RS
Posted : 11/21/2013 10:57 AM
Post #29151 - In reply to #29148

Barry

Many thanks for the fast and thorough response. Makes sense now as long as I am right about Periods - I think the periods indicates how many bars back to set the intercept date (point at which the indicator line is zero) - then (in percentage terms) regardless of the actual price of the stock, you are comparing like for like percentage changes over the same period.

Phew!! OT 2014 - here I come!!!

BTW - is there anywhere I can access a list of all of these params?


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Barry Cohen

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Subject : RE: DSS & RS
Posted : 11/21/2013 11:05 AM
Post #29153 - In reply to #29151

There isn't a list, but there are references under Help -> Contents:

- Trading Strategies in OmniTrader -> Creating and Editing Strategies -> Filter Block.

- Technical Formula Reference.

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JamesR

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Subject : RE: DSS & RS
Posted : 11/21/2013 11:16 AM
Post #29155 - In reply to #29148

Steve

That was my impression, but then I couldn't fathom the point of the Periods - having done a bit of reading around on the Net, I concluded the periods set the number of bars back at which the indicator is normalised to zero - that would then mean the comparisons were meaningful - I am however, struggling to prove that to myself!!!

I have been trying to plot them in a graph window to compare - will report back if I get any meaningful results!....

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Steve Luerman

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Subject : RE: DSS & RS
Posted : 11/21/2013 11:25 AM
Post #29156 - In reply to #29153

Barry,

I see that you have specified a different set of parms than are used in the "DEFAULT" RS calculation in DSS. The shipped default is "RS(10,"$SPX",0)". You've set the last parm to "1", rather than "0". I just now went back and looked at Matthew Greenslet's indicator (see http://www.omnitrader.com/currentclients/proforum/thread-view.asp?threadid=2032&start=51&posts=65). In the example code, the last parm can be set to "1" to normalize the result.

So, the example you provided (I think) is normalized. But, as shipped, the default is not normalized (it has the last parm set to "0").


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Jim Dean

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Subject : RE: DSS & RS
Posted : 11/21/2013 11:34 AM
Post #29157 - In reply to #29155

Here is a valid way to calc Normalized RS of a symbol X vs another symbol Y over a time window of Pds bars - X and Y are the closing prices of their respective symbols:

( (X - X[Pds] ) / X[Pds]
/
((Y - Y[Pds] ) / Y[Pds] )
) * 100
… but the calc must have a provision in it to prevent divide by zero if Y = Y[Pds]

Another way to normalize it, which is not as helpful but which avoids divide by zero checking:

( X/Y - X[Pds]/Y[Pds] ) / (X[Pds]/Y[Pds) * 100


Barry, which of these does RS use within DSS?

If neither, could you please tell us the specific formula, like I just did?

Thanks.

[Edited by Jim Dean on 11/21/2013 11:38 AM]

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Barry Cohen

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Subject : RE: DSS & RS
Posted : 11/21/2013 12:52 PM
Post #29160 - In reply to #29156

The example I posted was not the DSS default, it was just the default when selecting it in the Formula Builder. The DSS default is "RS(10,"$SPX",0)".
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Jim Dean

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Subject : RE: DSS & RS
Posted : 11/21/2013 3:07 PM
Post #29164 - In reply to #29160

Barry, which of the formulae that I posted a few hours ago does RS use within DSS?

If neither, could you please tell us the specific formula, like I just did?
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