The Top 5 Benefits of Using Relative Strength Momentum Inversions Are Often Overlooked on the desire to simply buy and make money with stocks, ETFs or mutual funds. This, plus the fact that the name “relative strength boost” sounds intimidating and many people just don’t get it.

As I wrote above, “Avoiding Mistakes with Relative Strength Reversal”, RSM-based analysis takes momentum analysis a step further by benchmarking how strong the momentum of the stock or fund is and even better. , if set up correctly, how strong the particular ETF gold fund is compared to others. Therefore, this compelling RSM analysis focuses on ticker symbols that are strong and have the potential to not only remain strong but continue to rise; and when they fail, analysis indicates it’s time to sell.’

Benefit #1:

This is one of the most proven technical analysis methods for finding consistent winning trades.

A multitude of books have been written on RSM, including Michael J. Carr’s Definitive Guide: Smarter Investing In Any Economy (currently out of print, but hopefully about to be reprinted soon).

Benefit #2:

RSM works for all types of investment:

  • short term
  • Long-term
  • Moderate
  • Aggressive
  • Conservative
  • Inventory
  • ETFs
  • Investment funds

Benefit #3:

The formulas that give the best results can be implemented even if you are non-technical or math-savvy because they are an integral part of readily available trading software.

Different formulas, all related, offer the possibility to decide which way of analyzing RSM provides you with the relative strength momentum reversal method that suits your goals and personality.

Carr tests seven different formulas for relative strength:

  • Alpha
  • Normalized Rate of Change (ROC)
  • counterweight ROC
  • Front-weighted ROC
  • Price/moving average ratio
  • Multiple Moving Average Ratios
  • Averaging different time periods

Benefit #4:

Trading with alpha or any of the other RSM methods can be easily combined with other buy-sell rules in both personal trading software and investment advisory software.

These buy-sell rules include:

  • stops
  • How long to hold a position
  • Ranking to make sure it ranks high among your ticker symbol group

Benefit #5:

You can perform a simple technical analysis with or without standard deviation (SD). By adding SD to the analysis, you can, in effect, automatically be more conservative.

In fact, with or without SD, you can optimize any RSM calculation such as alpha to meet your conservative, moderate, or even aggressive investment goals with the right investment software.

While relative strength momentum investing sounds intimidating, the benefits can lead to long-term growth of your portfolio, especially if you find a personal investment software program that transforms RSM in a few mouse clicks and allows you to compare gains. and potential risks.