The Cross-Market Relative Strength Strategy is a performance-based trading approach that compares the strength of different markets, sectors, or asset classes to identify leaders and laggards. It helps traders focus on assets with momentum in their favour, improving trade selection, timing, and probability of success.

This strategy is widely used in forex, stocks, indices, commodities, and ETFs, and is especially useful for capital rotation analysis, trend-following setups, and tactical allocation decisions.

What Is Cross-Market Relative Strength?

Relative Strength (RS) compares the performance of one asset to another. It answers the question: Which asset is outperforming its peers?

For example:

• EUR/USD outperforming GBP/USD = EUR strength
• Nasdaq outperforming S&P 500 = tech leadership
• Gold outperforming oil = defensive tone

By identifying these dynamics across markets, traders can enter high-conviction positions that align with broader capital flows.

Why Use This Strategy?

• Focuses on strength, not predictions
• Filters out weak setups in favour of outperformers
• Enhances entries by trading in the direction of capital rotation
• Useful across all timeframes and asset classes
• Helps avoid markets under institutional distribution

Key Applications Across Markets

1. Forex
Compare currency pairs to identify strongest/weakest currencies.
Example: If AUD is strong across AUD/USD, AUD/JPY, and EUR/AUD → bullish AUD bias.

2. Indices
Identify outperforming global markets (e.g. DAX vs S&P 500) or sectors (e.g. tech vs energy).

3. Commodities
Compare gold vs oil, or copper vs silver to understand inflation, growth, or industrial demand.

4. Crypto
Compare BTC vs ETH or major altcoins to spot leading digital assets.

How to Trade the Cross-Market Relative Strength Strategy

1. Build a Relative Strength Matrix
Create a dashboard to track weekly or daily performance across similar assets (e.g. all G10 currencies, major indices, or top ETFs).
Rank assets from strongest to weakest.

2. Identify Consistent Leaders and Laggards
Focus trades on:

• Leaders in uptrends (buy opportunities)
• Laggards in downtrends (short opportunities)

3. Use Ratio Charts for Confirmation
Plot custom ratio charts (e.g. AUD/USD vs NZD/USD, Nasdaq/SPX, Gold/Oil).
Rising line = first asset outperforming
Falling line = second asset outperforming
Use moving averages or trendlines for clean visual signals.

4. Combine With Technical Setups
Once strong assets are identified, apply price action tools:

• Trendline breaks
• Fibonacci retracements
• Support/resistance zones
• Momentum confirmation with RSI/MACD

5. Watch for Relative Strength Reversals
Sharp reversals in RS often precede trend changes.
Example: BTC/ETH ratio starts falling → ETH may begin to outperform BTC.
Use divergence between RS and price to anticipate turning points.

Example Trade Setup

Scenario: EUR shows strength across all pairs (EUR/USD, EUR/GBP, EUR/JPY)
USD weakens vs most majors
Trade: Long EUR/USD or EUR/JPY
Entry: Breakout of resistance with MACD crossover
Stop-loss: Below structure
Target: Next resistance or fib extension

Tools and Indicators for RS Strategy

Relative Strength Ratio Charts (TradingView)
Performance tracking tables
Moving averages (for slope and crossover signals)
Correlation matrix (optional for filtering redundancy)
Momentum indicators (RSI, MACD)
Intermarket comparison dashboards

Best Markets and Timeframes

Markets: Forex majors, global indices, ETFs, crypto, commodities
Timeframes:
Swing: 4H–Daily
Position: Daily–Weekly
Intraday: 15M–1H (use short-term RS matrices)

Common Mistakes to Avoid

Confusing Relative Strength with RSI (they’re not the same)
Chasing weak assets—stick to strength in strength
Ignoring RS reversals—momentum can shift quickly
Overtrading every RS signal—filter with price action
Not checking for correlated exposure—diversify setups

Conclusion

The Cross-Market Relative Strength Strategy empowers traders to stay aligned with market momentum and institutional capital flows, improving both trade selection and outcome consistency. Whether you’re trading forex, indices, or crypto, RS reveals where the action is—and where it’s fading.

To learn how to implement professional-level RS dashboards, sector rotation models, and cross-asset timing strategies, enrol in our advanced Trading Courses at Traders MBA and learn how to trade what’s moving, not just what’s familiar.