WHAT ARE RELATIVE ROTATION GRAPHS (RRG)?
A Relative Rotation Graph® (RRG®) is a complete top-down analysis technique developed by Julius de Kempenaer after many years of research. Relative Rotation Graphs will help you look at the relative performance of a Security, Index, or Asset Class, and determine how it’s performing relative to the benchmark or an average of its peers.
Symbols typically progress in a clockwise direction on an RRG chart with the line colour representing the quadrant the symbol is currently in. Each dot on the line of the symbol represents the time period you have set for the chart.
RRG Quadrants:
- Leading—Strong relative strength and strong relative momentum
- Weakening—Strong relative strength with weakening relative momentum
- Lagging—weak relative strength and weak relative momentum
- Improving—weak relative strength with improving relative momentum
WHY USE RELATIVE ROTATION GRAPHS?
RRGs allow you to see rotation of leadership within any group of securities. Years of subjective and quantitative research has proven to us that every security that is a leader will one day rotate into under performance. Have you ever had the situation where you selected a market leader based on its historical performance only to see weaker returns? That’s because all securities rotate away from being leaders. The RRG is the only chart available that allows you to visualise this on a single chart.
Optuma allows you to run RRGs on any time frame, from months down to intraday time frames. This is a fantastic way to monitor the relative movements of the securities in your universe during the day, and see them updating in real-time. The same principles work in all time frames.
RRG Charts in Optuma
Optuma teamed with RRG Ltd to take the RRG® concept and produce an incredible implementation that allows you to easily create RRGs from Watchlists, Symbol Lists, even Market Scan Results. The best part is in Optuma you can move back and forth through history seeing not only where a security is today, but where it has come from and what it has done in the past.
We’re excited to add RRG charts to Optuma! We are always looking for ways to allow traders and analysts to have a unique view of the market to provide an edge in analysis. RRG is one of the very best charting methods we have seen for revealing the relative strength of securities.
Click to enlarge
RRG Video
What do the arrows and coloured quadrants mean? How can we use RRGs to manage a portfolio and make stock selections? In this 35 minute video we take a look at the theory behind RRGs and how you can use them today. If you are new to RRGs, this is a must-watch introduction.
Derived Indicators
Optuma, together with RRG Research, has taken the concept of RRGs and extended them beyond a simple visualization. Optuma is the only application in the world where you can access the Angle, Heading, Rate of Change, Quadrant and Distance of securities on the RRG. These are the key data points that were used in our quantitative analysis of RRGs (see below).
Optuma is also the only implementation that allows you to set the sensitivity of the rotations so that you can control how quickly the rotations react to market movements.
Quantitative Research
As soon as this chart was released, people wanted to know if it could be used as a trading strategy. We wanted to know that too. Using the Optuma Quantitative Tools, we were able to test a number of trading ideas and see the results. You can read more about our tests and the results in our Research section. Look for the following White Papers:
- Buying out-performers is too late.
- RRG Weights
FX RRGs
Optuma is the only provider making available Foreign Exchange RRGs. The choice of benchmark is an important consideration in all RRGs, but what do we choose with currencies? There is a lot of confusion about cross rates as some are quoted as USDXXX and others as XXXUSD.
Optuma solves all of this by allowing you to select the base currency and generating an RRG that shows you how each currency is performing relative to the base currency.
RRG Trial
If you want to see for yourself how RRGs in Optuma can make a significant difference, click on the button below to request a trial of Optuma. We have Trader, Professional, and Enterprise editions. The Professional and Enterprise editions include the full RRG, while the Trader has the light version of RRGs (the full RRG can be added for $20 per month). This trial will be for the Enterprise edition to enable you to test all features of the RRG.
