This help section explains the Delta Relative Strength indicator. If you have questions about how to generate Delta Relative Strength values or how to maintain the Delta Relative Strength database, refer to the Delta Relative Strength database help section.
Delta Relative Strength is a concept unique to Investigator created by James McConnell. It uses Relative Strength values, so you should be thoroughly familiar with the Relative Strength indicator before continuing.
Delta Relative Strength is an indicator that shows which financial instruments are moving up or down the Relative Strength lists for a particular time period. For example, an instrument that has the past four Relative Strength values of 90, 90, 90 and 90 is interesting, but how about an instrument that has the past four Relative Strength values of 20, 30, 40, and 50? Clearly, for momentum traders, this could be the start of a big move. One might not notice this trade because it appears at the bottom of the Relative Strength lists. Alternatively, Delta Relative Strength could be used as an indicator for exiting trades if the instrument dropped below a certain DRS value.
The instruments that are rising the fastest on the Relative Strength lists are given a value of 99, while the instruments that are declining the fastest on the Relative Strength lists are given a value of 1. Investigator allows you to generate these values over multiple time periods. The most popular periods are 4 and 6 periods. Investigator also allows you to see the percent change the instrument made over the Relative Strength periods. You can use both the Delta Relative Strength value and the percent change value in testing.
Delta Relative Strength is calculated as follows:
Assume a 4 period Delta Relative Strength.
First, start at one and count sequentially and add the count until you reach the number of Delta Relative Strength periods. We’ll call this Sum 1.
1 + 2 + 3 + 4
Then, calculate the Divisor. This is done by first adding up the squares of the above count. We’ll call this the Sum of Squares value.
(1 * 1) + (2 * 2) + (3 * 3) + (4 * 4)
The Divisor calculation continues as follows:
Divisor = 4 * Sum of Squares - (Sum 1 * Sum 1);
(The 4 above represents the number of DRS periods.)
Next, calculate the sum of the current RS value and the past 3 RS values. We’ll call this Sum 2.
We’ll then calculate Sum 3 as follows:
the RS value 3 periods ago +
2 * the RS value 2 periods ago +
3 * the RS value 1 period ago +
4 * the current RS value
Finally, the Delta Relative Strength value is calculated as follows
(4 * Sum 3 - (Sum 1 * Sum 2)) / Divisor
(The 4 above represents the number of DRS periods.)
After finding the DRS percent change for each instrument in the database, make a list by sorting the DRS percent change values so that the highest percent change is at the top of the list and the lowest percent change is at the bottom of the list.
Take the number of items on the list and divide by 99 (not 100, since the values go from 1 to 99, not 0 to 100) to find out how many instruments are in a Delta Relative Strength value period. For example, if there are 196 financial instruments in your database, there would be 2 instruments in each Delta Relative Strength value period. (Two would have a value of 99, two would have a value of 98, etc.)
Go through the sorted list, starting at the top, and assign each instrument it’s Delta Relative Strength value. (Using the above database example of 196 financial instruments, the first two instruments on the list receive a Delta Relative Strength ranking of 99, the next two instruments on the list receive a Delta Relative Strength ranking of 98, etc.)
Reference: This documentation.
Note: There are two ways to view Delta Relative Strength values and percents. You can either view the values and percents for a particular date by selecting Delta Relative Strength from the Special menu and View / Delete RS Values from the Delta Relative Strength menu, or you can view the values and percents for a particular financial instrument by opening the chart for the instrument and selecting Breadth from the Indicators menu and Delta Relative Strength from the Breadth menu.
When you view Delta Relative Strength values on a particular chart, the values will not appear on the chart unless the current Relative Strength directory points to the directory that contains that chart’s Delta Relative Strength information. Click here for information on how to change the current Relative Strength directory.
If the proper relative strength directory is chosen, the chart will then show the Delta Relative Strength value and percent linesfor the selected bar. If you click on a different bar, the Delta Relative Strength value and percent for that bar will be shown.