V.10:1 (22-25): The Internal Dynamics of TRIN by Jack Rusin
Product Description
The Internal Dynamics of TRIN
by Jack Rusin
Consider four simplified trading days on the New York Stock Exchange:
Day 1: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 100,000 shares down volume. TRIN = (1000/100)/(1,000,000 /100,000) = 10/10 =1.00.
Day 2: 100 issues advance, 1000 issues decline, with 100,000 shares up volume and 1,000,000 shares down volume. TRIN = (100/1000)/(100,000/1,000,000) = 0.1/0.1 = 1.00.
Day 3: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 200,000 shares down volume. TRIN = (1000/100)/(1,000,000/200,000) = 10/5 = 2.00.
Day 4: 100 issues advance, 1000 decline, with 200,000 shares up volume and 1,000,000 shares down volume. TRIN = (100/1000)/(200,000/1,000,000) = 0.1 /0.2 = 0.50. A TRIN below 1 is considered bullish.
The Trin (Figure 1) is a sophisticated yet simply calculated method of assessing relative volume flows. Conceptually, it is based on three ratios: the average declining volume, the average advancing volume, and a comparison between these two average volumes . It is an excellent way of measuring relative volume flows, but because of the mathematics of the index, it can yield counterintuitive results.
Most traders use a simpler method for assessing bullishness or bearishness, which may or may not be consistent with the TRIN figures. Rather than looking at daily and long-term moving averages of TRINs, those investors look at the daily and long-term net advances versus declines and whether the net volume is increasing. In fact, net advance-decline (Figure 2) considerations are central to technical analysis' conceptualizations of bullish and bearish.
Consider four simplified trading days on the New York Stock Exchange:
Day 1: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 100,000 shares down volume. TRIN = (1000/100)/(1,000,000 /100,000) = 10/10 =1.00.
Day 2: 100 issues advance, 1000 issues decline, with 100,000 shares up volume and 1,000,000 shares down volume. TRIN = (100/1000)/(100,000/1,000,000) = 0.1/0.1 = 1.00.
Day 3: 1000 issues advance, 100 decline, with 1,000,000 shares up volume and 200,000 shares down volume. TRIN = (1000/100)/(1,000,000/200,000) = 10/5 = 2.00.
Day 4: 100 issues advance, 1000 decline, with 200,000 shares up volume and 1,000,000 shares down volume. TRIN = (100/1000)/(200,000/1,000,000) = 0.1 /0.2 = 0.50. A TRIN below 1 is considered bullish.
The Trin (Figure 1) is a sophisticated yet simply calculated method of assessing relative volume flows. Conceptually, it is based on three ratios: the average declining volume, the average advancing volume, and a comparison between these two average volumes . It is an excellent way of measuring relative volume flows, but because of the mathematics of the index, it can yield counterintuitive results.
Most traders use a simpler method for assessing bullishness or bearishness, which may or may not be consistent with the TRIN figures. Rather than looking at daily and long-term moving averages of TRINs, those investors look at the daily and long-term net advances versus declines and whether the net volume is increasing. In fact, net advance-decline (Figure 2) considerations are central to technical analysis' conceptualizations of bullish and bearish.
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