The Arms Index (TRIN)

The Arms (TRIN) Index is a very well known and very important intraday market analysis tool. It is a unique tool that gives us information that you normally don’t see in the markets. It compares the number of rising stocks with the number of falling stocks and expresses this ratio graphically. In addition, the volume is included and the formula of the TRIN finally looks like this:

Number of Advancing Issues / Number of Declining Issues
Volume of Advancing Issues / Volume of Declining Issues

There is one TRIN for the listed stocks on the NYSE and another for the NASDAQ (TRINQ). You can have a TRIN-x calculated for any basket of stocks. But the two are the most common in the market. Note that the TRIN is inversely readable. Upward trends are bearish, downward trends are bullish.

How to use a TRIN? First of all, as a long-term or swing trader you don’t really care about the TRIN, because this is a pure IntraDay Analyzer. But there is a long-term approach to its use, where historical numbers show that the 5 and 10 days moving average represent reversal points.

During bullish times, the TRIN is usually below 1.0. When the TRIN reaches 10 days Moving Average at 0.8, you are very often close to a relative high price. When the TRIN arrives at 1.2, the market is very often very close to a relative low. In these areas it makes sense to be alerted in order not to miss a price reversal.

As an IntraDayTrader, we monitor the TRIN throughout the trading day. The general rule is that if the TRIN crosses the 1.00 line down, the market becomes bullish, or if it crosses above 1.00, the market shows bearish potential. In addition, the trend of the TRIN must be monitored. The trick is to look at the combination of the current TRIN ratio and the trend in the chart to get a meaningful insight.

In the AgenaTrader, some of our datafeeds provide the possibility to add the TRIN as an indicator. If you, for example, are trading the ES or NQ, you can orient yourself by the respective stocks basket of the Nasdaq100 or the NYSE in the form of the TRIN where the market might go.

You can also use the TRIN for individual shares and draw conclusions about individual shares on the basis of the overall market behavior.

 

Disclaimer:

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. Hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. All information on this website is for educational purposes only and is not intended to provide financial advice. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold this information harmless in any and all ways.

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