Relative Strength: Trade the Strongest

Relative strength is how a stock is doing compared with the market, not compared with its own past. It's not RSI, which is a different indicator. If QQQ is down 1% and a stock is up 1%, that stock is strong. If QQQ is up and the stock is red, it's weak.

Why it matters: when the market turns your way, the strongest names usually move the most. Trading them is like riding with the wind at your back. It doesn't guarantee anything, but it stacks the odds.

Three ways to see it, all free

1. Your watchlist. With SPY and QQQ at the top, compare everyone's Chg% to theirs. Fast, but it only shows the day so far.
2. The Compare tool. On the stock's chart in TradingView (affiliate link), click Compare or Add symbol on the top toolbar and add QQQ. The scale switches to percent, so both lines start together at the left edge of your screen. A strong stock stays above and holds when QQQ dips. (On the free plan you're limited in how much you can add to one chart; if it complains, remove something.)
3. A ratio chart. Type the stock, a slash and the market in the symbol search, like NVDA/QQQ. The line rises when the stock beats the market and falls when it lags.

What to look for during the session

• The market makes a lower low; the stock makes a higher low.
• The market pulls back; the stock just goes sideways near its high.
• The stock holds above its pre-market high while the market drifts.
• All of it on more volume than usual.

Relative weakness is the mirror image. Weak stocks in a falling market are the ones short sellers watch.

Common mistakes

• Chasing. Strength after a huge run is late. Wait for your setup at a level.
• Mistaking a fading news spike for strength. Strength holds; spikes fade.
• Forgetting the market. A strong stock can still drop if the whole market sells off.

Futures traders

Watch the biggest Nasdaq names against NQ. When the leaders hold up while NQ dips, dips are often bought. When the leaders crack first, be careful buying.

Your task

For your next three paper sessions, write one line at 10:00 a.m. Eastern: the strongest name on your list against QQQ, and the weakest. Don't trade it yet, just watch. Then go to lesson 8.