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Understanding the TRIN and How To Trade Off Of It

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March 05, 2012 – Comments (0)

TRIN is one of those indicators that shows a broader perspective on the markets and looks deeper into the underlying market action than what is seen by simply looking at the chart of the S&P or any other index. 

Essentially, the TRIN is taken by calculating the following: 

(advancing stocks/declining stocks)/(advancing volume/declining volume)

Now this isn't something that you have to calculate by hand. In fact most trading platforms should do this for you. For example on ThinkorSwim it is "$TRIN" and you get it. 

So what the TRIN does is allow for you to figure out whether it's the bulls or bears winning the day when trading by determining whether more volume is going into advancing issues, or more volume is going into declining issues (i.e. stocks). When it is the former the TRIN is below "1" when it is the latter the TRIN stays above (by the way the TRIN is sometimes call the "Arms Index" after its founder)

However, the way I was taught was to not look at whether the TRIN is above or below the "1.0" but 1) how it is trending and 2) The level of extremes that it is reporting

Here's the rest of the article.  

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