Ratio charts – reading and applying

Ratio charts – trends and pivot points

Chapters

• 00:00 Intro – Why Ratios?
• 00:40 Reading Ratios: What Do They Mean?
• 01:40 European markets – sector vs index
• 03:20 US markets – small vs large caps
• 05:20 Sectors and commodities
• 06:40 Key Points & Insights

Quickly to:

• Description
• What we cover
• Step-by-step workflow
• Key points
• Common pitfalls
• Short FAQ

Description

Power in comparison.

Create a ratio chart compares the price performance of one share, sector or index with another.
This allows you to see more quickly which markets or sectors outperform and where weakness arises.
In this guide you will learn about ratios interpret correctly, pivot points recognize and how to use these insights
can use for your portfolio.

What we cover

• Base: what a ratio chart is and how it is constructed.
• European examples: sectors vs. Stoxx 600, CAC40 vs. DAX40.
• American examples: small/mid caps vs. large caps, growth vs. value.
• Commodities and gold: important ratios compared to the Dow Jones and S&P500.
• Use: following trends, spotting pivots, context for allocation.

Step-by-step workflow

1. Choose your ratio. Compare sector to index, or small caps to large caps.
2. Analyze the trend. Rising ratio = outperformance; falling = underperformance.
3. Find pivot points. Look for horizontal support/resistance, rounded bottoms or tops.
4. Use multiple horizons. Look at weekly and daily charts to combine long and short trends.
5. Translate into action. Ratio often confirms which sectors or stocks you want to consider or avoid.

Key Points of Ratio Charts

• Ratios filter noise: relative strength quickly reveals leaders and laggards.
• Confluence counts: ratio turn + price level gives additional confirmation.
• Long trends: Ratios often signal movements that last for months or years.

Common pitfalls

• Looking too short: One day or week says little; focus on the trend.
• Ratio = price expectation? It's a comparison, not an absolute price target.
• Forgotten context: always combine ratios with price and macro environment.

Not much experience with investing yet? Then this might be the right choice
introductory guide to help you on your way.

Short FAQ