Description:
The price comparison indicator is a tool used to compare the price movements of different financial instruments or assets over a specified period. It allows traders and investors to visually assess the relative strength or weakness of one asset compared to another, typically by plotting the price ratio or difference between the two assets on a chart.
Input Parameters:
n/a
Use Case:
- Pairs Trading: Traders use price comparison indicators to identify pairs of assets that historically move together. By plotting the price ratio or difference between the two assets, traders can detect deviations from their typical relationship. When the ratio or difference diverges significantly from its historical average, traders may initiate a pairs trading strategy, buying the underperforming asset and simultaneously selling the outperforming one, anticipating a reversion to the mean.
- Sector Rotation: Investors often track the relative strength of different sectors within the market using price comparison indicators. By comparing the performance of various sector ETFs or stocks against a benchmark index like the S&P 500, investors can identify sectors that are outperforming or underperforming the broader market. This information helps investors adjust their portfolio allocations, rotating into sectors showing strength and reducing exposure to weaker sectors.
This feature can be used in:
- Smart Checklist
Do you want to learn more? Check out our blogpost.
May 15, 2024