Strength Indicator-Explained.

Definition: It is an indicator to show the current strength of stock price based on its position with respect to key levels.

Premise : Strength of a stock is a function of its price movements with respect to immediate key levels as per price action theory.

Immediate Key levels: 1. Previous day High and Low. 2. Current day 1st 10 Minutes High and Low.

Values of Strength : Very Strong , Strong on bullish side and Very Weak,Weak on bearish side.

Here is the picture :

Strength1

So the system continuously compares the price with the four key levels and indicates the real time strength.

 How to identify the reversals during the day: One key interpretation of Strength could be to know there is a price reversal….when it happens/as it happens.

Here is how: Assume a stock starts with Neutral strength and moves to Strong. After some time it comes back to Neutral. This indicates that the price is having resistance at today’s 10min High.   Similarly it moves back to Neutral after becoming Weak indicating

that the price is having Support at today’s 10min Low.

 Key reversal stages could be – Neutral->Strong->Neutral,

Neutral->Strong->V.Strong->Strong, 

Neutral->Weak->V.Weak->Weak, Neutral->Weak->Neutral

Any questions? Please put in comments.

 

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