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Selecting Market Leaders with Relative Strength: Find the Winners Before the Crowd
Using relative strength and ratio charts, you'll identify stocks and sectors that consistently outperform the market. This lesson demonstrates the selection process, from index to stock.
Those who seek better investment results in the long term do not focus on “cheap” stocks, but on market leaders:
securities that demonstrably outperform the market or their sector. In the video on this page, Mark explains how market leaders are selected through relative strength,
on the basis of ratio and comparison charts.
You will learn to work according to a structured process:
from strong index to strong sector, and then to strong stocks.
Watch the full video with explanations and examples above.
What are market leaders?
Market leaders are stocks or ETFs that not only rise,
maar structurally outperform their reference.
They often take the lead when a new market phase starts
and retain their value relatively better in more difficult market conditions.
- In strong markets, market leaders ensure maximum participation.
- In weaker markets they often offer relative protection.
- During market rotations, they identify early where capital is shifting.
Relative strength: measuring instead of estimating
Relative strength is not a subjective judgment, but a measurable comparison.
The performance of a stock or sector is measured against a benchmark,
such as a broad index or sector index.
This comparison makes it clear whether an effect
outperformance realizes,
what is essential for structured investing.
Ratio and comparison charts as a tool
Instead of just looking at price charts,
is being worked with ratio charts:
the price of one instrument divided by that of another.
- A rising ratio indicates increasing relative leadership.
- A declining ratio indicates declining strength.
- Breakthroughs in the ratio can signal sector rotations early.
When to apply relative strength?
Relative strength works best when selection tool.
It helps in filtering markets, sectors and stocks,
but does not in itself constitute a complete entry or exit system.
That is why relative strength is always combined with
trend analysis and structural confirmation in the price chart.
The selection process: from broad to specific
- Analysis of the general market and dominant index.
- Selection of sectors that outperform the market.
- Identification of stocks that are leading within that sector.
- Timing and follow-up via technical structure.
Theoretical core (first 22 minutes of the video)
- Introducing the concept of market leadership
- The importance of benchmark comparison
- Interpretation of ratio charts
- Relative strength as a structural selection criterion
This theoretical framework is followed by an extensive practical discussion in the video
with concrete examples and explanations per tab.
Common Pitfalls
- Use relative strength independently of market environment.
- Ignoring timing in strong stocks.
- Confusing relative strength with momentum indicators.
Further training and further education
Anyone who wants to integrate this methodology into a regular investment routine,
Another contribution on ratio charts can be found here:
Ratio charts: seeing and exploiting outperformance
And on the next page an overview of training courses and workshops
around structured investing and technical analysis.
View the training courses and workshops on learning to invest
