The Top 5 Benefits of Using Relative Strength Momentum Inversions are Often Overlooked in the desire to simply buy and make money with stocks, ETFs or mutual funds. This is on top of the fact that the name “relative strength boost” sounds intimidating and many people just don’t get it.
As I wrote earlier, “Avoid Mistakes With Relative Strength Investing,” RSM-based analysis takes momentum analysis one step further by performing a comparative analysis of how strong the stock’s or fund’s momentum is and even better. , if set up correctly, how strong the particular ETF gold fund is compared to others. Therefore, this compelling RSM review focuses on tickers that are strong and have the potential to not only stay strong but continue to rise; and when they fail, the analysis indicates that it is 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 about 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 investments:
- 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 not technically savvy or a math expert because they are an integral part of readily available investment software.
Different formulas, all related, offer the possibility to decide which way of analyzing RSM gives you the relative strength momentum investment 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:
Investment analysis with alpha or any of the other RSM methods can be easily combined with other buy-sell rules in both personal investment software and investment advisory software.
These buying and selling rules include:
- stops
- How long to hold a position
- Ranking to make sure position is high among your stock symbol group
Benefit #5:
You can perform 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 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 in your portfolio, especially if you find a personal investment software program that transforms RSM in a few clicks of the mouse and allows you to compare earnings vs. potential risks.