An improved relaying protection algorithm is proposed based on the analysis and combination of the characteristics of negative-sequence power direction comparison theory and cluster algorithm. This improved new algorithm features in forming the related areas of the corresponding bus protection and line protection with wide-area information and the real-time structure of the topology of system, setting characteristic vectors of the related protection, developing state information matrix of the system and locating faults with the output of the matrix. The case of IEEE-39 bus system elaborates processes and results of fault location and back-up protection, which verifies the ability of this improved new algorithm to locate faulty area and faulty component. Meanwhile, this improved new algorithm brings better fault tolerance by improving redundancy of information when applied to wide-area back-up protection.