Take up Arms in your Day Trading with the TRIN
The TRIN, also called the Arms Index, was first developed by Richard W. Arms, Jr. My apologies to Mr Arms & all my readers for the title of this post.
This is Part One in a series on the TRIN.
Ever see any of those trading contests where each trader who enters starts with the same amount of money in his account, then after a certain period of time the trader with the largest account wins? Imagine there's the Minimalist Traders Contest with big prizes, with only two strict rules:
- Day Trade any stock or Future you like (no overnight positions)
- Your charts are allowed to have price bars or candles of the item you're trading, but you can choose ONLY ONE other technical analysis tool.
I wouldn't even have to think about it. I'd choose the TRIN.
So what exactly is the TRIN? It's a way of comparing the number of stocks that are advancing or declining in the market, to the volume of trading occurring in those advancers & decliners. So for example if there were more advancers than decliners, that would sound bullish. But if not only were there more advancers than decliners, but the advancers were getting more than their share of the Volume, that would REALLY be bullish. And that's the type of information the TRIN gives you.
The formula for the TRIN is:
Number of Advancing Stocks / Number of Declining Stocks
Advancing Volume / Declining Volume
The TRIN was originally applied to NYSE data, but later was applied to other markets as well. So now you have:
- NYSE TRIN
- NASDAQ TRIN
- AMEX TRIN
- RUSSELL 2000 TRIN
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