Understand · what it is and why it exists
01What it is
Relative strength as context is the discipline of using the comparison to narrow, size and review — and never to trigger. A rising ratio puts a stock on the list; it does not buy it. A falling ratio takes it off; it does not short it. The entry still needs a setup, a level, a stop and a size.
This is the lesson that stops people misusing the idea. Relative strength is one of the most useful readings in the market and one of the most abused, because it is so easy to treat a ratio turning up as a reason to act.
02Why it exists
It exists because context and triggers are different jobs. Context answers 'should I be looking at this at all, and how much should I trust it?' A trigger answers 'now?' Relative strength is excellent at the first question and useless at the second — a ratio can rise for months without ever offering a sensible entry.
03How it is measured or observed
Four jobs relative strength does well:
- FilterFrom a thousand names to twenty: rising ratios into the long pile, falling into the short pile, the rest ignored.
- Conviction / sizeA setup in a name leading its sector and the market gets full size; the same setup in a laggard gets reduced size or none.
- Intraday tide checkIs the stock above its VWAP while the index is below? Strength against the day's tide raises conviction.
- Exit tellA position whose ratio starts falling after leading is telling you the reason you entered is fading — before the price says so.
Read · seeing it in the market
04How professionals read it
Professionals never let relative strength pull the trigger. The sequence is: relative strength narrows the list; the setup (level, structure, volume) decides whether there is a trade; the stop and size decide how much; relative strength then monitors whether the reason is still valid. It is the first and last step, never the middle.
They also resist the temptation to chase a ratio that has already run. A stock that has led for six months is on everybody's list; the edge was in noticing the ratio's turn, not in joining its crowd.
05What strength looks like
Context used well: the stock is chosen because it leads; the trade is taken because a setup appeared at a level on volume; the size is full because both tides agree; the exit is triggered when the ratio rolls over. Four decisions, relative strength in two of them, never the trigger.
Illustrative. The index (navy) chops; the stock (gold) holds and climbs — context that raises conviction for a setup, if one appears.
Source: illustrative teaching data — not market data
06What weakness looks like
Context misused: buying because the ratio turned up, with no level, no stop and no setup; or shorting because the ratio turned down. The reading was right and the trade was still wrong, because a filter was used as a trigger.
Use it for
- Narrowing the watchlist
- Deciding size and conviction
- Checking the day's tide
- Reviewing whether the reason still holds
Never use it for
- Entering without a setup
- Chasing a ratio that already ran
- Overriding a stop
- Replacing the pre-trade checklist
Which job relative strength does.
Interpret · what it means for you
07What it means for an investor
For an investor the same discipline applies over years: relative strength is a reason to research a company, not to buy it, and a reason to revisit a thesis, not to sell it. The decision still rests on the business.
08What it means for a trader
For a trader this is the Advanced program's pre-trade order of operations: Symbol (chosen by relative strength) → Setup (structure and volume) → Entry → Stop → Position size (conviction from context) → Target. Relative strength decides the first and influences the fifth. It is never the setup.
09What it cannot tell you
- When to enter.
- Where the stop belongs.
- Whether a setup exists at all.
Apply · the market right now
10What is happening right now
MAAL TRADING ACADEMY market note
No dated note has been published for this topic yet. We only publish current-market commentary that the instructor has written and dated — nothing auto-generated.
Data · previous close
Live levels for SPY, QQQ appear here once the licensed market-data feed is connected. We do not show unlicensed or made-up numbers.
How to check this yourself today
- Take your current watchlist and sort it by ratio slope against the right benchmark.
- For the top three, ask: is there a setup — a level, a structure — or only a rising ratio?
- For any open position, check whether its ratio has rolled over since entry.
11Visual market example
The four decisions in order: the ratio chose the stock, the setup chose the moment, the volatility chose the size, the ratio's roll-over chose the exit. Relative strength was in the first and the last. The middle was the trade.
Step
- 1. Symbol
- 2. Setup
- 3. Entry
- 4. Stop
- 5. Position size
- 6. Target / review
Decided by
- Relative strength (filter)
- Structure, level, volume
- The setup's trigger
- Where the setup is wrong
- Volatility + conviction from context
- Levels; ratio roll-over as exit tell
Advanced program framework.
Review · practise, keep, connect
12Test your understanding
Read the chart the way you would before a trade. Pick the answer, then read why.
1A stock's ratio to SPY turned up yesterday after months of decline. There is no level nearby and no structure on the chart. What does the Advanced framework say?
Illustrative.
Source: illustrative teaching data — not market data
13Key takeaways
- Relative strength filters, sizes and reviews. It never triggers.
- Symbol → Setup → Entry → Stop → Size → Target: relative strength is step one and influences step five.
- A ratio that already ran is everyone's list; the edge was the turn.
- A rolling-over ratio is the earliest exit tell.
15Learn it in class
Advanced Program · Stage 4 · Trading Ranges · Stage 7 · Trading the Closing Bell
Before any simulated trade: Symbol → Setup → Entry → Stop → Position size → Target. Relative strength picks the symbol; it is never the setup.