Traders Index

A trader called Richard Arms decided to combine the number of advancing and declining issues with the volume of advancing and declining issues. This indicator shows the ratio of the average trade size for declining shares to the average trade size for advancing shares, and is independent of the number of trades or the total volume traded. The indicator was known as the Arms Index after its inventor, but is now commonly called the TRIN, which is short for TRaders INdex. What it shows is whether there is more volume in the rising stocks or in falling stocks. If the value is below one it shows more volume in rising stocks which is a positive indication. Values over one are negative, and show more volume in declining issues. Therefore it is a contrary indicator which goes in the opposite direction to the market. Here it is added to the DJIA chart.

Exceptionally high spikes usually show a market bottom. As the TRIN gives such a jagged line, the 10 day moving average of the value is often used. Alternatively, it can be smoothed to a certain percentage, as shown in this screenshot.

Richard Arms suggested that the best use was as an extreme indicator, looking for very high or very low values. Although the index does not track the price (inversely) as closely as the previous ones, you can still clearly see it is a leading indicator for the price reversals.