V.16:3 (111-121): Improving The Win-Loss Ratio With The Relative Strength Index by Thomas Bulkowski

Improving The Win-Loss Ratio With The Relative Strength Index by Thomas Bulkowski

Here's a refresher on the relative strength index, and how to improve your win-loss ratio.

Technical analysts can be divided into two basic camps — those who rely on charts and those who use indicators. Of course, you can use both methods; you might even want to combine them using statistics. If you know your indicator well enough, you should be able to examine any chart and tell when the indicator is going to signal. That may be part of the secret of being a successful investor: Knowing when your tools work and when they don’t; predicting when they will signal, and when they won’t.

I am partial to charts. I was a convert from the fundamental camp; it was almost 15 years after I began to invest seriously that I took an interest in the squiggles that a price series makes over time. Later still, I began to believe that reading the charts held some significance. For example, now, I won’t buy a stock if I see a bearish reversal forming. I might miss an opportunity, but I’m lowering the risk of losing my shirt.