The book as name suggest goes in to details about using Relative Strength to design a trading strategy. Relative strength based strategies are one of the ways to exploit the momentum anomaly. Relative strength strategies aim to find strongest or weakest stocks, ETFs, or sectors in any market environment and to trade them on long or short side till they maintain there relative strength. Well formulated relative strength based strategies keep you on the right side of market.
The book goes in to details of various ways to rank stocks. Formulas for calculating relative strength using absolute difference, normalised ROC, moving averages, front or back weighted ROC, and standard deviation are detailed.
In the next section the author demonstrates ways to build trading strategy using Relative strength. He goes in to issues like:
- What vehicles to buy using Relative Strength
- What time frames for relative strength are ideal
- When should you buy and sell
- How should you manage your risk
Some of the most successful trading methods in the market are based on relative strength . It is one of the proven methods in the market that works. This book provides a good guide to investors interested in learning and applying about relative strength based strategies.
The book certainly is not "The Definitive Guide to Relative Strength Investing " because it is very narrowly focused on one trading system application of relative strength. It could have done a much better job of illustrating many more relative strength based approaches. The first chapter in the book is the worst, it never defines relative strength properly and spends more time trying to repudiate momentum investing, when in fact the entire rational of relative strength investing is based on stock momentum.
In spite of some reservations, this is one of the best books out of 70-80 books on trading I have read so far this year. I highly recommend this book because it contains ideas and concept which can make you money.