How to Make Money in Stocks — Chapter 3: Relative Strength & Institutional Accumulation

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William O'Neil's How to Make Money in Stocks Chapter 3: Master RS Rating and Accumulation/Distribution metrics to target leaders.

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How to Make Money in Stocks — Chapter 3: Relative Strength & Institutional Accumulation

"Buy the best performing stocks in the top performing industry groups." — William O'Neil

Financial Context

Chapter 3 explores Relative Strength (RS) metrics to identify true market leaders.

Wall Street Application

1. Relative Strength Rating (1–99)

  • Mechanism: Ranks a stock's 52-week price performance against all US equities.
  • Threshold: Target stocks with RS Rating > 80 (ideally > 90 prior to breakout).

2. RS Line Breakouts

  • When the broader market pulls back, monitor equities whose RS Line hits new all-time highs ahead of price.

Trading Execution Rules

  1. Enforce RS > 80 Filter: Reject underperforming equities.
  2. Buy Relative Strength Leaders: Target resilient stocks during market pullbacks.
  3. Focus on Top Industry Groups: Concentrate capital in the top 10% performing sectors.