by Jerry Favors
Whether you know it as the trading index (TRIN) or the Arms index, this particular indicator has inspired
variations ranging from an issue/volume-weighted long-term index to this, a short-term trading indicator
based on a five-day sum of TRIN. Newsletter publisher Jerry Favors explains.
Most traders are familiar with the trading index (TRIN), which was originally devised by Richard
Arms. (For obvious reasons, it is also referred to as the Arms index.) Its premise is simple enough: in
order to compute the trading index each day, divide the ratio of advancing issues to the number of
declining issues by the ratio of advancing volume to declining volume. The data necessary to compute
TRIN can be found every day in The Wall Street Journal , or you can call your broker and get the closing
TRIN reading for the day. If you have access to cable television, CNBC shows the closing TRIN reading on
its tape at the end of each trading day.
VARIATIONS ON A THEME
Most analysts use a 10-day moving average of TRIN as an indicator. The 10-day TRIN reaches oversold
when it rises above 1.00, while it reaches overbought when it falls below 0.80. The 10-day TRIN has a
very impressive record at market bottoms but is not nearly as accurate at market tops. My favorite
method of using TRIN data is based on a version from W.G. Bretz's Juncture Recognition in the Stock