The Magic of RS: Outperform Market with High-Flying Stock
The Magic of RS: Outperform Market with High-Flying Stock, Understanding Relative Strength to the core and apply concepts in your swing trading.
Course Description
When you identify the stock that is outperforming the market, buying it is easier said than done. There is always this conflict with our thought process and belief system. Human nature is such that we always ask for discounts or we like to buy stuff at a cheaper price. A stock that is traded near historical lows is easier to buy because we often believe in buying something that has the potential of rising. We may however exit early because riding what is going up is a psychologically tough option for many. We feel that if we buy something at a lower level, it has a limited downside and a huge upside potential. So, it is typically easier to buy underperforming and relatively weak stocks rather than strong stocks.
On the contrary, it is difficult to buy what is going up because we are worried that we might get caught with stock right near the top. Even a marginal technical correction from the highs will result in a drawdown that will make us get into a panic mode. There are pros and cons to every method. Buying when the price is rising and at high looks intelligent in hindsight. But it is not psychologically comfortable at a practical level. But I believe chances of rewards are more when we are least comfortable in trading.
Outperformance does not necessarily follow outperformance. Price can consolidate or there can be temporary underperformance. There are patterns in the behavior of these outperformers and underperformers of stocks to index.
