Swing trading
What is a relative strength strategy (trading stocks outperforming their sector index)?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Relative strength strategy involves identifying and holding stocks that are outperforming their sector or broader index, based on the premise that strong relative performance often persists over intermediate timeframes.
How it works
Traders compare a stock's price performance ratio against its sector ETF or index over weeks to months, favoring names showing consistent outperformance (new relative highs) during uptrends.
An example
If a semiconductor stock rises 20% while the semiconductor sector index rises only 8% over the same period, it displays strong relative strength worth monitoring for continuation.
Risk & limitations
Relative strength leadership can rotate quickly, and a stock's past outperformance does not guarantee it will continue leading during the next market phase. Note: this links to a general technical-analysis association resource, not a page documenting this specific named method, so verify details against a primary source.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.