It's easy to be pleased that a stock "went up," but that number alone can be misleading. If, over the same period, the overall market (the S&P 500, for example) rose more, that stock is actually lagging — it's only going up because almost everything goes up when the market is in a broad uptrend.
What relative strength (RS) is
Relative strength compares a stock's performance against a benchmark index over the same period. On DSMarketLearning it's calculated as the stock's ~3-month return minus the S&P 500's return over that same period, expressed in percentage points. An RS of +8pp means the stock beat the market by 8 percentage points over that period; an RS of -5pp means it fell 5 points short.
Why it's a more honest signal than "it rose X%"
During a broad bull market, almost every stock rises, so "it went up" stops being useful information on its own. Relative strength isolates how much of that move is specific to the stock, rather than the market simply carrying it along. Stocks with sustained positive relative strength tend to be the ones attracting more institutional interest within a sector or the market as a whole.
How it's used in the scanner's score
The score awards up to 20 of 100 points when relative strength is positive, capped at +10pp to prevent a single extreme move from dominating the calculation. It's how the scanner distinguishes "this stock has its own momentum" from "this stock is just moving with the market's tide."
This article is educational content, not personalized investment advice. Before making decisions, read our disclaimer.