Maybe I just misunderstood the article from [investopedia](https://www.investopedia.com/articles/trading/08/relative-strength.asp) and someone can explain what it actually means?
In: Economics
Imagine you come across a stock that you are sure is massively undervalued, so you are confident it is going to go up in value soon. You really want to buy some of this stock, naturally. The problem is that all of your money is tied up in another stock, so to get the cash to buy you have to sell that other stock. But the other stock is at a lower price than you bought it for! On the face of it this looks like a loss, but that is a sunk-cost fallacy. What matters is which stock I expect to see a better return on in the future; the past is irrelevant.
With relative strength, you are not buying high and selling low in terms of value, but performance. Essentially, the percentage increase in value. So it’s saying you want to buy a stock when it’s returning 10%, but then sell it when it’s only returning 2.5%. You aren’t selling it at a low price, you’re selling it when your returns on that investment aren’t as high as they were when you purchased it.
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