Moving Average Relative Strength (MARS)

TradingView script

Tough times call for tougher measures.

Here's my take on relative strength using a simple moving average, some cricketing analogies & a Tradingview script.

What is MARS?

MARS stands for Moving Average Relative Strength.

We compare the distance from 50-day moving average of the stock vs that of the index. Whomsoever of the 2 has a greater value is stronger.

The length of the moving average is customisable as per your time-horizon.

The basic structure of the script

Background color indicates the index being above or below its moving average.

1. Blue: index above its MA

2. Pink: index below its MA
   
   Histogram indicates whether the stock is under-performing or out-performing the index.
   
   - Up-bars: out-performing
   - Down-bars: under-performing

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Outperformance

When, between the stock & the index,  the difference between the distance to/from the 50-day moving average is positive, the stock is out-performing.

This outperformance can be of 3 types:
⦿ Relative
⦿ Absolute
⦿ Gross

Absolute Outperformance

• Batting conditions are tough. Sachin has made just 25 runs (bearish), but Kohli has easily made 60 runs (bullish).

• The index is bearish, but the stock is bullish.

• The script prints blue up-bars on a pink background.

Gross Outperformance

• Batting conditions are easy. Sachin has made 55 runs (bullish), but Kohli has made 65 runs (bullish).

• Both index & stock are bullish, but stock is more bullish

• The script prints green up-bars on a blue background.

  

  Relative Outperformance

• Batting conditions are tough. Sachin has made 20 runs (bearish), but Kohli has made 35 runs (less bearish).

• Both index & stock are bearish, but stock is less bearish

• The script prints light green up-bars on a pink background.

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Underperformance

When, between the stock & the index,  the difference between the distance to/from the 50-day moving average is negative, the stock is under-performing.

This underperformance can be of 3 types:
⦿ Relative
⦿ Absolute
⦿ Gross

Absolute Underperformance

• Batting conditions are easy. Sachin has already made 70 runs (bullish), but Kohli has only made 25 runs (bearish).

• The index is bullish, but the stock is bearish.

• The script prints black down-bars on a blue background.

Gross Underperformance

• Batting conditions are tough. Sachin has made 35 runs (bearish), but Kohli has made only 20 runs (more bearish).

• Both index & stock are bearish, but stock is more bearish

• The script prints dark red down-bars on a pink background.

Relative Underperformance

• Batting conditions are easy. Sachin has made 80 runs (bullish), but Kohli has made 55 runs (less bullish).

• Both index & stock are bullish, but stock is less bullish

• The script prints light red down-bars on a blue background.

Additional customisation options:

• Paint bars option changes the bar colors to mirror the histogram colors.

• Easy colors option just changes the histogram colors to either blue or pink, indicating out-performance or under-performance, respectively. This is when the trader does not wish to demarcate between the above-mentioned 6 conditions.

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Conclusion

In a nutshell, we would love Absolute Outperformance, & totally stay away from Absolute Underperformance.

Resources

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Update

• Default plot display is now a line style, instead of the previous histogram style. This is still user-customisable.

• Moving average for smoothing of MARS is now incorporated. By default, it uses a 9 EMA of MARS. If the MARS stays above its moving average, it indicates that MARS is going up, & is a bullish sign.

• Text description of the current relative strength state is visible as a table. It is a verbose table by default (with details of the current MARS state). You can turn-off the detailed text or even hide the entire table altogether.

• Easy color mode is turned on by default. Easy colors are now really 'easy', as the out-performing & under-performing colors are now represented by green & red, respectively.

Hope you find this useful.