Article Categories
» Arts & Entertainment
» Automotive
» Business
» Careers & Jobs
» Education & Reference
» Finance
» Food & Drink
» Health & Fitness
» Home & Family
» Internet & Online Businesses
» Miscellaneous
» Self Improvement
» Shopping
» Society & News
» Sports & Recreation
» Technology
» Travel & Leisure
» Writing & Speaking

  Listed Article

  Category: Articles » Finance » Stock Market » Article
 

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




By 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.


 
 
About the Author
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-
David Jenyns is recognized as the leading expert when it
comes to MetaStock and designing profitable trading systems.

His MetaStock website offers a huge free collection of trading
related tips and tricks. Gain free access now.
Click Here ==> http://www.meta-formula.com/subscribe
-=-=-==-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-

Article Source: http://www.simplysearch4it.com/article/15654.html
 
If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/15654.html" as shown above and make it hyperlinked.



  Some other articles by David Jenyns
Insider Trading - Blogging That Might be Risky Business
Can blogs revolutionize stock trading? David Jenyns of SystemTradingBlog.com thinks so. Web logs are growing at an exponential pace on the internet, with an unpredictable and dramatic rise in new users and new ...

A Sneaky Way to Steal Someone Else's Forex Trading System
Anyone who is serious about trading needs to have a Forex Trading System that is tailored to them, but there is no reason to start constructing your ...

  
  Recent Articles
Be A Rebel: Contrarian Investing
by Christopher Smith

Advantages of Online OTCBB Stock Trading
by Praveen Ortec

Online share trading can be a liberating experience
by Martin McAllister

The Bulls And Bears Game: Risks And Survival Strategies In Investments
by Wain Roy

How Do You React When Your Stocks Are Down
by Christopher Smith

What You Don't Know About Micro Cap Stocks
by Christopher Smith

Free Money in Stock Market: Conversion
by Alexander Chong

Stock Trading Tip
by Joe Grabowski

Penny Stock Winners - What To Do Next
by Christopher Smith

The Stock Market For Newbies
by Joe Grabowski

Forex Trading Course: A Must for Forex Beginners
by Zevs Borealis

How To Get An Advantage Trading Penny Stocks
by Christopher Smith

Insider Trading and How To Profit From It!
by Larry Potter

Greed - The Ugly Duckling of Investing
by Branden Moskwa

The most Important Article on Day Trading for Beginners.
by Linda Wainman

The Mind Game of Day Trading
by Linda Wainman