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Selecting the optimal reference satellite is an important component of high-precision relative positioning because the reference satellite directly influences the strength of the normal equation. The reference satellite selection methods based on elevation and positional dilution of precision (PDOP) value were compared. Results show that all the above methods cannot select the optimal reference satellite. We introduce condition number of the design matrix in the reference satellite selection method to improve structure of the normal equation, because condition number can indicate the ill condition of the normal equation. The experimental results show that the new method can improve positioning accuracy and reliability in precise relative positioning.