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External Relative Strength
IT'S
NOT JUST KNOWING WHEN TO
GET IN. IT'S
KNOWING WHAT
YOU'RE GETTING INTO.
One of
the most difficult aspects of investing in the stock markets is selecting the
BEST PERFORMING STOCKS!
If the above two sentences hold true for you, then its about time you start
paying more attention to studying the external
relative strength.
Over the
course of time there have been few financial activities that occupied the time
of more people with less success than attempting to beat the market. So many
people have tried and failed, that it has become a popular belief that no one
can consistently outperform the market averages.
Nothing could be further from the truth.
Everyone
cannot beat the market, because everyone in the market is the market. But that
does not eliminate the possibility that some investors, if armed with the proper
tools to monitor the market and an investment strategy which takes advantage of
the information available to them, can realize returns on their investments
above the market averages.
External Relative Strength
External
Relative Strength is the measure of how a security has performed versus all
other securities. This is superior to comparing a security to an index since
most indexes are weighted by market cap or price.
External
Relative Strength (ERS) is a technical analysis strategy to help investors sort
through all the recommendations and to identify trends of individual stocks.
When the upward trends of stocks are identified early enough, the stocks may be
purchased and a profit may be realized by a continuance of the trend. Although
past performance is not necessarily a determining factor in future performance
of a stock, using Relative Strength Analysis for stock selection has proven to
be a profitable strategy over time.
This
selection, which is used to compare all of the stocks that are being followed,
will sort them by their strength rating of the previous week placing a rank on
them and then sorting them by the current week's strength rating.
This
report is one of the most valuable tools of the trader. The report will show you
which stocks are stronger and how much they are stronger than the previous. It
provides you with a means of analyzing hundreds of issues without having to look
at each of the individual charts to make comparisons. This tool has provided
superior returns in testing and in actual practice. The idea is to buy stocks
that are experiencing strong upward momentum with the expectations that the
stocks will continue to be strong. These can be found within the top 10 or 20
issues.
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