Technical Analysis, Studies, Indicators:
TRIN
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Richard Arms developed the TRIN indicator (which is also known
as the ARMS indicator) in the 1970s. The TRIN indicator is calculated by
dividing the Advances/Declines (AD) Issues Ratio by the AD Volume Ratio.
At the current moment we are the only source who provides TRIN
for U.S. indexes and exchanges which allows to use it in the
S&P 500,
NASDAQ 100,
Russell 2000 and other
indexes technical analysis and
market timing.
The
formula for the TRIN indicator (or TRIN) is simple:
TRIN = (AD Issues Ratio)/(AD Volume Ratio)
Or to put it more specifically:
TRIN = ((Advancing issues/declining issues)
/ (advancing volume/declining volume))
The TRIN was developed as a contrarian indicator with the
intent of pinpointing the critical levels at which a market becomes overbought
or oversold. Generally, a rising TRIN indicates bearish sentiment and a
falling TRIN indicates bullish sentiment. The TRIN indicator may be applied to
any index or basket of stocks. Some sources refer to the TRIN indicator applied
to the New York Stock Exchange (NYSE) as the "NYSE Short Term Trading Index".
Analyses based on the TRIN indicator have evolved over the
years. Richard Arms original concept was to use the TRIN as an indicator for
detecting critical market levels. He assumed that a market was overbought when
the 10-day moving average of the TRIN declined below 0.8. Conversely, he
considered a market oversold when this moving average rose above 1.2.
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