STRUCTURE Market Structure · April 2026 · ~4 min

Relative strength: buy the strongest, not the cheapest

"This one fell the most, surely it's a bargain?" — the classic beginner trap. Strong stays strong and weak stays weak, over and over. Relative strength (RS) helps you tell them apart: divide one instrument by another (or by the index) to get a ratio line.

Reading the ratio

• Rising line: the numerator outperforms — this instrument is relatively stronger;
• Falling line: underperforms — relatively weaker;
• The key: it strips out the market's shared move and leaves only the excess — falling less when the market drops, rising more when it climbs, both are evidence of strength.

Why strong over cheap

The weakest is cheap for a reason, and bottom-fishing often catches a falling knife halfway down. Strong instruments with money flowing in tend to keep trending. The heart of trend trading is standing on the strong side.

Cheap is not a reason to buy; strength is.