Relative Rotation Graphs (RRG): the pros' rotation map
Relative Rotation Graphs (RRG), created by Julius de Kempenaer, are a visual way to see which assets or sectors are gaining or losing strength AGAINST a benchmark index, and how fast. Instead of looking at each asset separately, you place them all on a 4-quadrant plane and see at a glance who leads and who lags. It is an institutional tool (StockCharts, Bloomberg) that retail barely uses.
By the TradingCalculator.Pro team · Updated on · About us
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What it is
An RRG plots each asset as a dot on a plane split into 4 quadrants, always measured AGAINST an index (e.g. the S&P 500). It doesn't tell you whether something is rising in absolute terms, but whether it's doing better or worse than the market, and whether that edge is accelerating or fading. It's for comparing many assets at once and deciding where to focus.
The two axes
The horizontal axis is the RS-Ratio: relative strength versus the index (right = stronger than the market, left = weaker). The vertical axis is RS-Momentum: the PACE of that strength (up = the edge is accelerating, down = it's fading). The centre is the benchmark (value 100): sitting at the centre means behaving like the market.
The 4 quadrants
Top-right, Leading (strong and accelerating): the current winners. Bottom-right, Weakening (strong but losing pace). Bottom-left, Lagging (weak and falling): the losers. Top-left, Improving (still weak but regaining pace): possible next leaders. Each quadrant's colour sums up its health at a glance.
The rotation (clockwise)
The powerful thing about RRG is that assets tend to rotate CLOCKWISE between quadrants: Improving → Leading → Weakening → Lagging → and back to Improving. That cycle helps you anticipate: a sector entering "Improving" may be starting a leadership leg; one leaving "Leading" toward "Weakening" may be exhausting its edge.
The tails (the trajectory)
Each dot drags a "tail": the trail of the last weeks showing where it has come from and where it's heading. A long tail with a clear direction signals a strong, steady rotation; a short, tangled tail, indecision. The tail turns a still photo into a movie of the rotation trend.
How to use it
The classic use is sector rotation: load your portfolio with sectors in the Leading or Improving quadrant and avoid (or trim) those in Lagging. It also compares stocks, countries or asset classes against a single index. Always used with a carefully chosen benchmark and on weekly timeframes to filter noise.
Limits (honesty)
RRG measures RELATIVE strength, not absolute: an asset can be in the Leading quadrant and still fall in price if the whole market falls — it just falls less. It is not an entry signal on its own: it tells you where to look, not when to enter; for that you need your own analysis and risk management. And, like anything based on averages, it runs a step behind.