Stock Market Trading Tools

 

Stock Market Tools Trading Education Trading Systems Forex Trading Commodities Trading

Main Menu

Trading Tools Home
Market News
Trading Tools


 

More Stock Market Related Resources

 
Introduction

I feel that this article provides the most valuable information currently available for your search of: when to buy stocks in a sector. I hope you enjoy reading it as much as I enjoy providing it for you...




Metastock Part 1: Relative Strength Comparison (RSC) The Key Success Tool In Trading By Stock Market Sectors

David Jenyns

Within this report I'll show you how you can find these profitable trading opportunities with MetaStock. You'll be able to make use of techniques usually only used by professional traders, such as the Relative Strength Comparison. The basis of the RSC (Relative Strength Comparison) is found in sector analysis.


What is Stock Market Sector Analysis?


Stock market sector analysis is a top down stock selection method. Stock market sectors that are expected to outperform the rest of the market are identified, through methods such as the Relative Strength Comparison, and then stocks from those sectors are selected. The idea is that stocks selected from superior stock market sectors will perform in the same fashion as their sectors. This follows the principle that money generally flows from under-performing areas of the market to more profitable areas, a truth that has be tested by many traders.


"My studies have consistently shown that two equally bullish charts will perform far differently if one is from a bullish sector while the other breakout is in a bearish group. The favourable chart in the bullish group will often quickly advance 50 to 75 percent while the equally bullish chart in a bearish group may struggle to a 5 to 10 percent gain." - Secrets for Profiting in Bull and Bear Markets, Stan Weinstein, (McGraw-Hill 1992)


How can you use Stock Market Sector Analysis within MetaStock?


To identify stock market sectors that will outperform the market; you must first compare the strength of each sector against a chosen market index such as the S&P/ASX200 for the Australian market, or the Straits Times Index for Singapore. Once you've done this, you must rank the stock market sectors, and discover which ones are performing the strongest. After the strongest stock market sectors have been identified, you can see which securities are within the sectors. These individual securities can also be ranked against their respective stock market sector, which effectively allows you to single out the best performing stock market sectors.


The Relative Strength Comparison (RSC) is the best way to compare the strength of one security against a market index. The RSC compares a security's price change with that of a "base" or benchmark security.


When plotted on a chart, the RSC line can be interpreted as follows:


- An increasing RSC indicates that the security is performing better than the base security.
- A RSC that moves sideways indicates that both securities are performing the same.
- A decreasing RSC indicates that the security is performing more poorly than the base security.


It is important to note that just because the RSC may be rising in value, the security isn't necessarily rising in value as well. This rise only indicates that the security is performing better than the base security. For example, a security may be falling in price, but it may not be falling as fast as the base security. This would result in a rising RSC. Conversely, if the RSC is falling the security may not be reducing in value; instead it may be that it's price is increasing at a slower rate than the base security.


In the second and third sections of this article, you will learn how to use the various features of Metastock to calculate the RSC, and locate the best stock market sectors to choose securities from.



David Jenyns, leading expert in designing profitable trading systems, MetaStock website offers a huge free collection of trading related tips and tricks. http://www.meta-formula.com/subscribe





READ my articles; you'll FIND the most powerful insider trading plans & tips ever put together. Searching for these on your own, is a needle in a haystack (hard to find). I trade everyday & my progressive efforts found the perfect trading card, a set system & plans that really work. These online trading systems are unbelievably powerful, lucrative, reliable, yet simple to use. Until recently, I've kept this formula to myself. NOW, I reveal all.



More Stock Market Related Articles...
More Stock Market News...

Disclaimer

 

I am not a registered investment advisor or broker and do not purport to tell or suggest which securities you should buy or sell or which trading products you should buy.

 

You should always check with your licensed financial advisor and your tax advisor to determine the suitability of any investment or product.

 

You understand and acknowledge that there is a very high degree of risk in trading securities.

 

I assume no responsibility or liability for your trading and investment results or product purchasing decisions.

 

All information on the Stock Market Trading Tools website and other linked sites is provided for informational and educational purposes only and should not be construed as investment or purchasing advice.

 

You should not rely solely on the information on the Stock Market Trading Tools website or other linked sites in making any investment or product purchasing decision. Rather, you should use the information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments or trading products.

 

This website contains links to third party sites and by providing a link to those sites it does not imply any endorsement. In no event shall Stock Market Trading Tools or its representatives be liable, directly or indirectly, to anyone for any damage or loss arising from or occasioned by the creation, use or reliance on the third party sites or the information, advertising, products, resources or material accessed through Stock Market Trading Tools.

 

Featured Trading Tool


 
 

 

Current Stock Market News



 2006 MMV