Kirkpatrick’s Investment and Trading Strategies: Tools and Techniques for Profitable Trend Following

5. Stock Selection Using Relative Strength

During almost my entire investment career, I have considered that the best way to select stocks for investment or trading is through a relative strength method. By relative strength, I mean the strength of a stock’s price over a specified time compared with that of other stocks. All studies that I have seen from academia and professional investment management journals and books have substantiated this method as the one consistent method of beating the odds in Wall Street. There is no question that it works. The question then is how you calculate relative strength to capitalize on the inherent ability for strong stocks to continue with their strength for enough time to provide a profit to the investor. ...