How I Manage Risk with Relative Strength Rating of a Stock

The RS Rating of a stock is the starting point of my risk management.

I am referring to the RS Rating or Price Strength Rating of a stock as per the MarketSmith platform.

Here are some key pointers to note:

1) I will never buy a stock with a RS rating of less than 70

2) I will be very cautious about a stock with a RS rating between 70 and 80

3) I prefer to buy stocks with a RS Rating of more than 80

4) I love it when the RS Rating of stock is in the 90s

5) I will never hold on to a stock whose RS Rating drops below 70

6) I consider RS Rating to be a leadership trait

7) I consider RS Rating to be a non-negotiable parameter in my stock filtering system

8) I use RS Rating as a risk management tool

9) I use RS Rating to filter stocks

10) I use the RS Rating to put the odds of success in my favor

11) I prefer the RS Rating to rise after I have bought a stock

12) I do not pay attention to the historical RS Rating

13) Sometimes I use the RS Rating for position sizing

14) Higher the RS Rating, the better

15) Lower the RS Rating, the more is the risk

Regards,

Rohit Musale, CFA

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