Profits from identifying and trading securities showing superior relative strength
| Strategy Type | Relative Performance / Momentum Ranking |
| Market Outlook | Profits from identifying and trading securities showing superior relative strength |
| Risk Profile | Moderate - leaders can reverse, but trend persistence provides edge |
| Reward Profile | Strong returns from momentum continuation (30-60%+) |
| Time Horizon | Medium to long-term (weeks to months) |
| Iv Environment | N/A - pure price-based comparison strategy |
| Breakeven | Depends on relative performance persistence |
| Primary Instruments | US stocks via CFDs, Sector ETFs, S&P 500 components, Forex pairs |
| Mas Compliance | MAS regulated brokers required for CFD/futures trading |
| Trading Hours | Multiple sessions - US 9:30 PM - 4 AM SGT, Asia 8 AM - 4 PM SGT |
| Contract Size | E-mini S&P: USD50 per point; ETFs: varies |
| Settlement | Cash settled for CFDs and futures |
| Tax Treatment | No capital gains tax for individuals in Singapore |
| Margin Requirements | Standard CFD/futures margin |
| Cdp Account | Not required for CFD/futures |
| Singapore Relevance | RS ranking works globally - Singapore traders can identify strongest performers across all markets and time zones |
RS (Relative Strength) compares one securities performance to another or benchmark. RSI (Relative Strength Index) is an internal momentum indicator for a single security. Same name, completely different concepts.
The momentum effect - academically proven that past winners tend to keep winning for 3-12 months. Institutional flow, narrative, and self-reinforcing dynamics drive continued strength.
Generally seek RS scores above 80 (top 20%) for buy candidates. Above 90 is excellent. Avoid anything below 50 (below median). Use RS to focus on leaders.
For US stocks, typically S&P 500 (SPY). For sector stocks, compare to sector ETF. For international, use regional index. Choose benchmark that represents the comparison you want.
Weekly is common for most traders. Monthly rebalancing is statistically robust. Daily can be useful but creates more turnover. Match frequency to your trading style.
Mansfield RS measures how far the RS line is above or below its moving average (typically 52 weeks), as a percentage. Positive means outperforming trend, negative means underperforming.
Build composite score: e.g., 40% RS + 30% Quality + 30% Value. Screen for stocks passing multiple criteria. Research shows multi-factor approaches more robust than single factor.
When price and RS move in opposite directions. Bearish: price higher high, RS lower high. Bullish: price lower low, RS higher low. Divergences often precede reversals.
Track RS breadth - percentage of stocks with strong RS. Rising breadth is bullish. Divergence between index and breadth warns of reversal. Broad leadership healthier than narrow.
Exit when RS falls below threshold (e.g., below 50 percentile), RS breaks support, RS diverges bearishly from price, or RS rank drops significantly (30+ positions).
Calculate return vs benchmark for each security over lookback period. Rank all securities. Convert to percentile. Can use composite of multiple periods. Update at rebalance frequency.
Diminishing effectiveness of momentum/RS strategies over time due to increased use and crowding. Still works but smaller edge than historically. Requires more sophisticated implementation.
Walk-forward testing: train on 3 years, test 1 year OOS, roll forward. Check subsample robustness, parameter sensitivity, transaction costs. Sharpe, drawdown, win rate metrics.
When too much money chases same high RS stocks, returns compress and reversal risk increases. Monitor institutional ownership, factor flows. Diversify RS sources.
Large quant funds, momentum ETFs, smart beta products all use RS-based selection. Billions in AUM. Their flow affects RS. Can track via 13F filings and factor fund flows.
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