# Ratio Charts A Breadth, Sentiment & External Data concept (Relative strength & rotation) in the LuxAlgo Library, with 2 indicator implementations. ## What are Ratio Charts? A ratio chart plots one instrument's price divided by another's, bar by bar, so the line rises when the numerator outperforms and falls when it underperforms. Dividing strips out the direction both legs share and leaves pure relative performance, which is why ratio charts are the working surface of [relative strength comparative](https://www.luxalgo.com/library/concept/relative-strength-comparative/) analysis: sector versus index, stock versus sector, Bitcoin dominance, stablecoin dominance, copper versus gold, stocks versus bonds. Standard technical tools apply to the ratio series itself: practitioners draw trendlines on it, run moving averages over it, and trade its breakouts. The essential caveat is that a ratio says nothing about absolute direction. It rises just as readily when both legs fall and the numerator falls less. Construction details also matter, since currency, dividends, and index methodology can each tilt the line. The format's pedigree runs through both classic and modern practice. Relative strength charting against a benchmark has been a staple of equity analysis for decades, and cross-asset ratio work sits at the heart of the intermarket tradition John Murphy popularized: copper against gold as a growth read, stocks against bonds as a risk-appetite read, and the centuries-old gold/silver ratio in metals. Breadth-minded analysts chart an equal-weight index against its cap-weighted sibling to see whether the average stock confirms the headline index, a question also asked by [advance/decline internals](https://www.luxalgo.com/library/concept/advance-decline-internals/) and the [share of stocks above their moving averages](https://www.luxalgo.com/library/concept/percent-stocks-above-20-50-200-day-ma/). Crypto adopted the format wholesale. Bitcoin dominance and stablecoin dominance are ratio charts of market capitalizations rather than prices, ETH/BTC is the default relative-value pair, and basket-versus-benchmark ratios feed the rotation logic inside [crypto cycle models](https://www.luxalgo.com/library/concept/crypto-cycle-models/). Dominance ratios carry their own footnote: the denominator's composition shifts as tokens list and die and as stablecoins grow, so long-history comparisons are softer than they look, and traders often cross-check a dominance read against [exchange and stablecoin flows](https://www.luxalgo.com/library/concept/exchange-and-stablecoin-flows/) before leaning on it. ## How to set up and read a ratio chart Most platforms build one straight from the symbol box; the craft is in choosing the legs and reading the result. 1. Type the two symbols as a division expression in the symbol field, for example AAPL/SPY or XAUUSD/XAGUSD; most charting platforms, TradingView included, accept arithmetic between symbols. 2. Match the legs: keep both in the same currency, and for long equity histories prefer total-return versions or accept that dividends tilt the line. 3. Read slope and regime first: a rising line means the numerator is winning, while a flat, choppy line means no persistent leader, in which case relative bets have no tailwind. 4. Apply the normal toolkit to the ratio itself: a long moving average for the regime, trendlines on the swings, momentum for divergence checks. 5. Before acting, open both absolute charts side by side so you know whether a rising ratio means genuine strength or merely a shallower decline. ## How it's calculated One instrument's price divided by another's, plotted as a single series that tracks relative performance instead of absolute direction. ``` Ratio_t = P_A,t / P_B,t RS_t = 100 × Ratio_t / Ratio_0 (optional rebasing so the series starts at 100) Ratio_t / Ratio_t-1 = (P_A,t / P_A,t-1) / (P_B,t / P_B,t-1) P_A,t: price of the numerator instrument A at bar t, the asset under study P_B,t: price of the denominator instrument B at bar t, the benchmark or paired asset Ratio_t: relative strength ratio at bar t Ratio_0: ratio value on the chosen base date RS_t: rebased ratio, indexed to 100 at the base date t: time index (bar or day) ``` A rising ratio means A is outperforming B even if both are falling; it says nothing about absolute direction. Use split and dividend adjusted prices in a common currency, otherwise the ratio drifts for non-market reasons. Also called relative strength comparison, unrelated to Wilder's RSI. ## How traders use it - As rotation input: ranking sectors or assets by the trend of their ratio against a common benchmark drives overweight and underweight decisions; sector rotation models formalize the logic, and relative rotation graphs compress many of these relative lines into a single four-quadrant view. - As crypto regime context: Bitcoin dominance and stablecoin dominance are ratio charts of market capitalizations, and a rising stablecoin share is commonly read as de-risking within the asset class. - As a pairs tool: extremes and breakouts in the ratio between two related instruments generate long/short candidates, the discretionary cousin of a statistical pairs-trading stack. - As a breadth check: the equal-weight versus cap-weight ratio and similar internal comparisons reveal whether leadership is broad or concentrated, context that changes how much an index-level breakout deserves trust. - As macro risk gauges: stocks versus bonds, high-beta versus defensive sectors, and copper versus gold frame risk appetite from relative prices, a complement to option-derived fear measures such as the [VIX](https://www.luxalgo.com/library/concept/vix/). ## Ratio Charts vs related concepts - **Relative Strength Comparative** (https://www.luxalgo.com/library/concept/relative-strength-comparative/): RS comparative is the benchmark-specific application: your symbol divided by an index. Ratio charts are the general construction, usable between any two instruments for any relative question. - **Intermarket Analysis** (https://www.luxalgo.com/library/concept/intermarket-analysis/): The discipline that interprets bonds, stocks, commodities, and currencies as one connected system. Ratio charts are among its primary instruments; intermarket analysis supplies the economic reasoning about which ratios matter and why. - **Currency Strength Meter** (https://www.luxalgo.com/library/concept/currency-strength-meter/): Every currency pair is already a ratio, and a strength meter aggregates dozens of them into one score per currency. A ratio chart shows a single relationship in full detail; the meter trades that detail for a ranked overview. ## FAQ ### What does a rising ratio chart actually mean? Only that the numerator is outperforming the denominator over that stretch. Both assets can be falling while the ratio rises, because the numerator is simply falling less. Before treating a rising ratio as bullish, check the absolute charts of both legs so you know whether you are looking at strength or merely lesser weakness. ### Can you apply indicators to a ratio chart? Yes. A ratio is just another time series, so moving averages, RSI, trendlines, and divergence checks all run on it, and doing so is standard practice in relative strength work. Remember that the outputs describe relative performance only, and a thin or differently scaled denominator can make the ratio jumpy when neither leg is. ### How is a ratio chart different from a spread chart? A ratio divides one series by the other, making it unitless and suited to percentage comparisons across very different price scales; a spread subtracts one leg from the other, often weighted by contract multipliers or a hedge ratio, and reads in price units. Ratios dominate relative strength work, while spreads are the convention in futures, where the difference itself is quoted and traded. ### How do I make a ratio chart in TradingView? Type the expression directly into the symbol search, such as MSFT/QQQ or BTCUSD/ETHUSD, using exchange prefixes when symbols are ambiguous. The platform builds candles from the ratio and lets you apply indicators, alerts, and drawings to it like any ordinary chart. Other major platforms offer equivalent symbol math or spread-chart features. ### What is Bitcoin dominance? Bitcoin's market capitalization divided by the total capitalization of the crypto market, charted through time: a ratio chart of caps rather than prices. Rising dominance means Bitcoin is outperforming the rest of the asset class, not necessarily rising. Composition effects matter, because stablecoins and newly listed tokens change the denominator, so dominance levels from different eras are not strictly comparable. ### Are currency pairs ratio charts? In effect, yes: EUR/USD is the price of euros expressed in dollars, and cross rates extend the same arithmetic. That is why relative-strength reasoning transfers so naturally to FX, and why dashboards that rank many pairs at once amount to summarizing a grid of ratio charts. ### Should ratio charts use a log scale? For long histories, yes: on a log scale equal percentage changes in the relationship take equal vertical distance, so a move from 0.5 to 1 reads the same as a move from 1 to 2. On short horizons the choice matters little, but multi-year relative trends are visibly distorted on a linear scale. ## Implementations in the Library - Stablecoin Dominance (LuxAlgo): https://www.luxalgo.com/library/indicator/stablecoin-dominance/ - Relative Crypto Dominance Polar Chart (LuxAlgo): https://www.luxalgo.com/library/indicator/relative-crypto-dominance-polar-chart/ ## Related concepts - Relative Strength Comparative: https://www.luxalgo.com/library/concept/relative-strength-comparative/ - Relative Rotation Graphs: https://www.luxalgo.com/library/concept/relative-rotation-graphs/ - Currency Strength Meter: https://www.luxalgo.com/library/concept/currency-strength-meter/ - Sector Rotation Model: https://www.luxalgo.com/library/concept/sector-rotation-model/ --- Source: https://www.luxalgo.com/library/concept/ratio-charts/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/