It is used to measure performance of one instrument against a group of instruments and from that measurement an investor can quickly determine if he will do further work or look for another instrument to invest in.
ETF investors use this measure constantly as they are evaluating. Several sites on the internet have screeners available for their version of the Relative Strength Factor.
There is more than one way to develop a Relative Strength Factor, eg you can use the current stock price move against the related index value, or compare percentage change in the price versus percentage change of the index price.
There are a few places on the internet that offer screens related to the Relative Strength Factor'
- Investors Business Daily for Stocks
- ETFSCREEN for Etfs
Here is an article regarding screening Wall Street Journal including a number of resources.
According to Dorsey Wright
'Relative strength strategies have a long history of delivering market-beating returns.'