What is Relative Strength (RS Rating)? Definition, Formula, and Example
Relative Strength (RS Rating) measures how a stock's price performance stacks up against every other stock in the market over the trailing 12 months, expressed as a 1-99 percentile score.
Relative Strength Definition
Relative Strength — popularized by William O'Neil and Investor's Business Daily as the RS Rating — ranks a stock's price performance against the entire universe of tradeable stocks over the trailing 12 months. It is a *percentile*, not a percentage: an RS Rating of 96 means the stock outperformed 96% of all other listed stocks over that period, regardless of whether the stock itself is up or down in absolute terms. This is a completely different indicator from the Relative Strength Index (RSI), which measures a single stock's internal momentum on a 0-100 oscillator — the two share a name by coincidence of terminology and get confused constantly by traders new to technical analysis.
How Relative Strength Is Calculated
The IBD-style RS Rating weights recent performance more heavily than older performance, using rate-of-change (ROC) over four lookback windows:
Strength Factor = 0.4 × ROC(63) + 0.2 × ROC(126) + 0.2 × ROC(189) + 0.2 × ROC(252)
where ROC(n) is the percentage price change over the trailing *n* trading days (roughly 3, 6, 9, and 12 months). The 3-month window gets double the weight of any other single window, so a stock with a hot recent quarter can outrank a stock with a better full year but a cooling last three months. Every stock in the universe gets a Strength Factor, and the entire universe is then ranked and rescaled to a 1-99 percentile, with 99 being the top 1% of performers.
A related but distinct tool is the RS Line, a simple ratio of a stock's price to a benchmark index (usually the S&P 500) plotted directly on the chart. When the RS Line makes a new high alongside — or ahead of — the stock's own price high, it confirms the stock is leading the market rather than just riding a broad rally.
Worked Example
META carried an RS Rating of 96 in mid-2026, meaning its trailing 12-month performance beat 96% of all publicly traded stocks tracked by the ranking. To build the Strength Factor by hand: if META returned +18% over the last 63 days, +30% over 126 days, +42% over 189 days, and +55% over 252 days, the raw Strength Factor is:
0.4(18) + 0.2(30) + 0.2(42) + 0.2(55) = 7.2 + 6 + 8.4 + 11 = 32.6
That raw score is meaningless on its own — it only matters relative to every other stock's Strength Factor that day. Once ranked against ~6,000 other names and rescaled to a percentile, a Strength Factor in that range lands in the mid-90s, consistent with O'Neil's original research finding that the biggest stock-market winners averaged an RS Rating of 87 in the weeks *before* their major advances began.
When Traders Use It
Growth and momentum traders screen for RS Rating ≥ 80 as a baseline filter before applying any other criteria (earnings growth, chart pattern, volume) — the logic is that market leadership tends to persist, so today's strongest stocks are statistically more likely to keep leading than laggards are to catch up. Sector rotation traders track RS Rating shifts across industry groups to spot money flowing into a new leadership group, like semiconductors overtaking regional banks. Swing traders use the RS Line specifically to filter breakout candidates: a breakout on a new RS Line high has historically higher follow-through than one where the RS Line lags the price chart.
Limitations and Misconceptions
RS Rating is entirely backward-looking and momentum-based — it says nothing about valuation, and a high RS Rating can persist right up until the top of a bubble. It also compares against the *entire* market, so in a narrow rally (a handful of mega-caps carrying the tape) most stocks can show mediocre RS Ratings even in a bull market. Don't confuse it with RSI: a stock can have RSI 30 (short-term oversold) and RS Rating 95 (long-term market leader) simultaneously — they answer different questions on different timeframes.