Relative Strength Fixes the Hardest Part of Investing
When it comes down to it, the job of a military intelligence analyst is simple: gather all the information you can, distill it into a conclusion, then make a decision.
In my Army days, I often had to act with incomplete information. But I had to settle for that and make decisions based on what was in front of me.
My Army days taught me it’s impossible to know everything. There’s always something I don’t know — and even more things I don’t know I don’t know.
I accepted that as an intelligence analyst, even as the risks of wrong decisions meant potential casualties. (Thankfully, my unit never saw any.)
But it frustrated me when I started working in finance. I thought I should be able to get all the information I needed. Then, I could plug that data into a model to find a stock’s value. If the stock price was lower, I’d buy.
So I started reading everything about value I could find. I knew eventually I’d build the perfect model.
I was soon spending all my time combing through financial statements, not making money.
All the while, there was a much smarter way to pick stocks that I was completely missing…
Trade Smarter, Not Harder
After I read Mike Carr’s Smarter Investing in Any Economy, I realized my mistake.
I was trying to find all the information available about a stock. In reality, I only needed to pay attention to one thing: relative strength.
I didn’t need to waste my time modeling value. Wall Street firms were already doing that — and sharing the models they built with clients, who would buy and sell stocks accordingly.
Instead of trying to build my own model that could outperform Wall Street, I could simply piggyback off THEIR models by following relative strength.
RS shows which stocks large investors are buying or selling. These investors manage billions of dollars, and do their best to hide their trading activity. After all, if other Wall Street firms knew what their competitors were doing, they could develop strategies to benefit.
For example, it can take days to acquire a multi-billon dollar position. If another firm knew what was happening, they could buy shares and sell them later, as the process was nearing completion. This should lead to at least a small gain, and make trading more expensive for the other fund.
To prevent that from happening, billion-dollar funds hide their orders. The SEC requires reporting of some trades, but most are never disclosed.
Relative strength is designed to uncover those trades.
Once you know where major hedge funds are sinking their money, you can safely bet that stock’s price will go up. At that point, you can either buy and hold, or supercharge your gains with options.
It all seemed so simple. I couldn’t help but wonder why RS wasn’t a more popular indicator.
But after sitting down to work on my own RS models, I had my answer…
One Tiny Issue With Relative Strength
RS is challenging to calculate.
First, you have to compare one stock against all other stocks. That requires programming a way to calculate strength.
Then you need to sort the stocks based on that calculation.
Finally, you need to define strict buy and sell rules.
Most investors don’t have time for that.
At the start of my career, I spent a lot of time building RS models. I’ll share the details of that process on Wednesday.
But I know many of you don’t trade as a full-time job. You don’t have the time or resources to build your own model from the ground up…
That’s why Mike is making his favorite RS strategy available to you, for just $4 a month.
At the start of every month, he’ll conduct his research and send you a list of the TOP tickers to hold in your portfolio.
But that’s not all you get with Market Leaders…
You’ll also get exclusive access to my favorite options income strategy.
We just used it to close out two 100% trades in the last week — and with this strategy’s consistent track record, I’m confident many more are on the way…
To get all the details straight from Mike, click here now.
Senior Analyst, True Options Masters