✔️ Information reviewed and updated in November 2023 by Eduardo López
Technical analysis indicators such as Mansfield's will always be the best tools that traders can rely on to analyze financial movements. To use these tools it is necessary to apply mathematical formulas to different variables, such as the price of an asset.
However, thanks to technological advances, many of the platforms already have these indicators. Which allows your analysis to be easier to operate with bitcoin, alcoin, forex, or any other.
In this article we will tell you a little more about Mansfield's Relative Strength indicator, which represents the correlation that exists between two variables using Mansfield operations.
➡✨Definition of Mansfield's Relative Strength
The RS Mansfield indicator is an indicator of relative strength, created by Stan Weinstein. It is a very useful indicator for investing in stocks, as it shows whether one security or sector is strong relative to another.
When the indicator slopes upward, it means that the long-term prices of the first security are performing better than those of the benchmark. And on the other hand, when the indicator is down, the long-term prices of the first security are performing worse than those of the benchmark.
➡✨ What is it for Mansfield's Relative Strength?
Mansfield's Relative Strength indicator is used to examine whether a stock is performing better than the market. For this reason, it is only important to know the increase or decrease of the indicator.
Its main function is to look for the strongest values to be able to invest in themSince many investors think it is a good opportunity to invest when stocks or prices go down. However, this term depends on many factors which influence the behavior of the company.
➡✨ How is it obtained?
To obtain this indicator and be able to invest in stocks with it, you have to make a weekly chart. As they are medium / long-term investments, they must be calculated with an average of 52 weeks.
First you have to calculate the ratio for each period, and we know that the ratio is equal to the price of the weekly closing of the asset divided by the weekly closing of the index. With these data, the arithmetic mean of the last 52 weeks or ratios is carried out, and finally the percentage of variation is calculated by applying the arbitrary multiplier 10 that Mansfield chose.
➡✨How to use it?
To be able to use the Mansfield's Relative Strength indicator you first have to choose what you are going to compare your value with, and once you choose it you have to select the indicator. This indicator will show you a line above or below 0, which means if the value is strong or weak in relation to the other asset.
For example, if a stock falls 40% and the market is falling 80%, then it means that the stock is strong, as it is falling less than the market. The only thing that this indicator reveals to us is whether or not a stock has strength compared to the market.