Could someone point me to some additional reading material/reference books on the "traders index"? There is a nice piece on this in the book "Rules of the Trade" (pages 30-32). The author points out that it measures advancing to declining issues against volume, and can be used to verify TAS pressure points and potential reversals. I am interested in understanding this index better and learning how to apply it as suggested. Has anyone had success using it?
TRIN Indicator
- Thread starter Mr. Jones
- Start date
Rocky Buckley
Guest
Linda Bradford Raschke uses the TRIN; there would probably be more detail in her book, STREET SMARTS. Here's a link and a quote from LBR:
<url>http://www.mrci.com/lbr/spstory/index.cfm</url>
<quote>Another intraday indicator I would like to mention is the Trin (the concentration of volume in advancing and declining stocks.) Trin represents the market's "gas pedal". The absolute value of the Trin is not really as important as the direction it is trending. If the Trin is dropping from 80...76...74...72..., it indicates buying coming into the market. Someone is stepping on the gas pedal. If the Trin holds at a constant level from here, you can say that there is no selling coming into the market. In other words, there is no deterioration. In general, follow the trend of the Trin. A change in its direction confirms market turning points. (In the first 1/2 hour of trading, the Trin will tend to jump around a lot. Don't pay too much attention to this indicator until the majority of stocks have opened and had a chance to stabilize).</quote>
<url>http://www.mrci.com/lbr/spstory/index.cfm</url>
<quote>Another intraday indicator I would like to mention is the Trin (the concentration of volume in advancing and declining stocks.) Trin represents the market's "gas pedal". The absolute value of the Trin is not really as important as the direction it is trending. If the Trin is dropping from 80...76...74...72..., it indicates buying coming into the market. Someone is stepping on the gas pedal. If the Trin holds at a constant level from here, you can say that there is no selling coming into the market. In other words, there is no deterioration. In general, follow the trend of the Trin. A change in its direction confirms market turning points. (In the first 1/2 hour of trading, the Trin will tend to jump around a lot. Don't pay too much attention to this indicator until the majority of stocks have opened and had a chance to stabilize).</quote>
There are a multitude of ways to use the TRINs, and I know of many different traders who interpret it in their own unique ways. In its most basic form, high TRIN is associated with selling pressures and vice versa with low TRINs. Extremely high levels in TRIN are associated with market bottoms and vice versa....however, it is not as simple as that...
One of the ways Dick Arms, its originator uses the TRIN is to put a 3 and 5 day average of daily closing. While it was very useful in identifying the critical 4/4/01 Nasdaq bottom and the 2x bottom of the SPx, the very same readings would have kept you on the long side of the market throughout the summer and into the "fall" later on in 2001.... relying on the same readings later on in the year could have lead one to devastating losses...
Other forms of interpretation include Eliades' Open10 day TRIN, which is a 10 day running total calculation (the interpretation is somewhat the same), and some others simply use extreme intraday readings such above 3.0 for short-term bottoms...
To me, the TRIN first signals the "power" of a certain direction in the market. We know that high TRIN's are associated with oversold conditions, but anyone who has traded this market in any decent way knows that OVERSOLD leads to MORE OVERSOLD eventually.... and vice versa.... Chris Carolan, author of the Spiral Calendar, refers to this as "the TRINrose path" ... where many market participants, relying on TRIN as a measure of oversold conditions to justify knife catching, or holding on to longs as the market proceeds down to more oversold levels.....
Just as with any indicator, the TRIN is not "stand alone" - it must be used in context with the market's overall trend, but more importantly, used in tandem or to cross-reference with other measures of sentiment such as the TICK (now interpreted differently due to decimalization) and PCRatios - for me, there are a few ways to use TRIN, some I use for INTRADAY, and the others I use to attempt to forecast the market's direction over a swing to intermediate-term period.
For the INTRADAY (1-day) ONLY, it's pretty simple: NYSE TRIN's above 1.2 tend to keep me on the short-side, especially at 1.5 area and above... .9 to 1.2 is somewhat of a grey area.... below .8 tends to keep on the long side... (don't forget not to count the opening spikes early in the day, wait about 10-15 minutes for the TRIN to smooth out, and please don't use it stand-alone - just as a guide....or a confidence booster).
For the SWING to INTERMEDIATE-TERM - TRIN and TRIN averages need to be used in context of intermediate-term trend of the broad market, as well as to cross reference with sentiment measures such as PCRatios, AAII, RYDEX ratios and other Bull-Bear Readings etc....it kinda gets a bit more complex from there...
The underlying basis of using the TRIN is: OVERBOUGHT often leads to MORE overbought....and OVERSOLD often leads to MORE oversold....after all, how much time does the market stay at critical turning points in comparison to the time (and associated price moves) to get there?
....Hope that helps....
If you have any questions or comments, please feel free to e-mail me: fernando@tradingacademy.com
One of the ways Dick Arms, its originator uses the TRIN is to put a 3 and 5 day average of daily closing. While it was very useful in identifying the critical 4/4/01 Nasdaq bottom and the 2x bottom of the SPx, the very same readings would have kept you on the long side of the market throughout the summer and into the "fall" later on in 2001.... relying on the same readings later on in the year could have lead one to devastating losses...
Other forms of interpretation include Eliades' Open10 day TRIN, which is a 10 day running total calculation (the interpretation is somewhat the same), and some others simply use extreme intraday readings such above 3.0 for short-term bottoms...
To me, the TRIN first signals the "power" of a certain direction in the market. We know that high TRIN's are associated with oversold conditions, but anyone who has traded this market in any decent way knows that OVERSOLD leads to MORE OVERSOLD eventually.... and vice versa.... Chris Carolan, author of the Spiral Calendar, refers to this as "the TRINrose path" ... where many market participants, relying on TRIN as a measure of oversold conditions to justify knife catching, or holding on to longs as the market proceeds down to more oversold levels.....
Just as with any indicator, the TRIN is not "stand alone" - it must be used in context with the market's overall trend, but more importantly, used in tandem or to cross-reference with other measures of sentiment such as the TICK (now interpreted differently due to decimalization) and PCRatios - for me, there are a few ways to use TRIN, some I use for INTRADAY, and the others I use to attempt to forecast the market's direction over a swing to intermediate-term period.
For the INTRADAY (1-day) ONLY, it's pretty simple: NYSE TRIN's above 1.2 tend to keep me on the short-side, especially at 1.5 area and above... .9 to 1.2 is somewhat of a grey area.... below .8 tends to keep on the long side... (don't forget not to count the opening spikes early in the day, wait about 10-15 minutes for the TRIN to smooth out, and please don't use it stand-alone - just as a guide....or a confidence booster).
For the SWING to INTERMEDIATE-TERM - TRIN and TRIN averages need to be used in context of intermediate-term trend of the broad market, as well as to cross reference with sentiment measures such as PCRatios, AAII, RYDEX ratios and other Bull-Bear Readings etc....it kinda gets a bit more complex from there...
The underlying basis of using the TRIN is: OVERBOUGHT often leads to MORE overbought....and OVERSOLD often leads to MORE oversold....after all, how much time does the market stay at critical turning points in comparison to the time (and associated price moves) to get there?
....Hope that helps....
If you have any questions or comments, please feel free to e-mail me: fernando@tradingacademy.com
Rocky Buckley
Guest
Thanks easyrider - I don't have the book myself, so I'm glad you chipped in and saved Mr. Jones 150 clams. 
Rocky - Thanks for the reference recommendation.
Easyrider - Thanks for the confirmation on the way TRIN is used and for the heads-up on Linda's book.
Fernando - Thank you for taking the time to respond to my question regarding TRIN and for making yourself available for email follow-up questions. Thanks for providing me with Dick Arms name - I just ordered a couple of his books (The Arms Index & Trading Without Fear) to get a better quantitative understanding of the index. Thanks also for the caveat regarding the way Dick uses the indicator, and for the insights into how you use it.
My intention is to use the indicator for intraday trading. The way Nassar suggests using it as a daytrading signal, is as an indicator to verify potential breakdowns after rallies at resistance or as an indicator of bounces after sell-offs at support. He warns of becoming to microfocused trying to determine these potential INTRADAY reversals solely on the basis of Time and Sales volume changes - hence his recommendation to use TRIN as a supporting indicator.
A question I have regarding this suggestion is whether a strong enough correlation exists between a volume index like the TRIN and a single stocks INTRADAY reversals to warrant its use. In other words (within the context of this example and if I understand correctly) - according to your INTRADAY rule I would have been disinclined to enter a NASDAQ stock short position on Thursday 3/28, since the TRIN's range was between .391 and .875. I believe Nassar is saying that even if the TRIN is at levels that would indicate the overall market is oversold, you can still use it as an indicator to take a short position in a stock if it begins to move up (even if it is below .8) at the same time your time and sales window begins showing a spike in volume at a particular price after a low volume rally (The better example would probably be the reverse of this since most traders would not want to be trading against the trend). I'm hoping to gain more insight into potential correlation once I understand the math behind the TRIN, but would be very interested in knowing if you (or other traders) believe a correlation truly exists to enable a trader to use the TRIN in this fashion.
Thanks again
Easyrider - Thanks for the confirmation on the way TRIN is used and for the heads-up on Linda's book.
Fernando - Thank you for taking the time to respond to my question regarding TRIN and for making yourself available for email follow-up questions. Thanks for providing me with Dick Arms name - I just ordered a couple of his books (The Arms Index & Trading Without Fear) to get a better quantitative understanding of the index. Thanks also for the caveat regarding the way Dick uses the indicator, and for the insights into how you use it.
My intention is to use the indicator for intraday trading. The way Nassar suggests using it as a daytrading signal, is as an indicator to verify potential breakdowns after rallies at resistance or as an indicator of bounces after sell-offs at support. He warns of becoming to microfocused trying to determine these potential INTRADAY reversals solely on the basis of Time and Sales volume changes - hence his recommendation to use TRIN as a supporting indicator.
A question I have regarding this suggestion is whether a strong enough correlation exists between a volume index like the TRIN and a single stocks INTRADAY reversals to warrant its use. In other words (within the context of this example and if I understand correctly) - according to your INTRADAY rule I would have been disinclined to enter a NASDAQ stock short position on Thursday 3/28, since the TRIN's range was between .391 and .875. I believe Nassar is saying that even if the TRIN is at levels that would indicate the overall market is oversold, you can still use it as an indicator to take a short position in a stock if it begins to move up (even if it is below .8) at the same time your time and sales window begins showing a spike in volume at a particular price after a low volume rally (The better example would probably be the reverse of this since most traders would not want to be trading against the trend). I'm hoping to gain more insight into potential correlation once I understand the math behind the TRIN, but would be very interested in knowing if you (or other traders) believe a correlation truly exists to enable a trader to use the TRIN in this fashion.
Thanks again
....Well, if you can recall last thursday, the market was more UP than it was DOWN...there were 3 turns in the market on 3/28.....put a 5-min chart on the NDX, and you will see that almost on any given TIME or PRICE, trader would have been better served to trade from the longside of the market.....
...As mentioned, using the TRIN should never act as a stand-alone indicator, however, if I was forced to trade for the day only using the TRIN and nothing else (no other charts...nothing), I would trade in the direction as I indicated... thus, I am a buyer on pullbacks on a day like 3/28... and so on ( using the 'rule of thumb' I indicated on the previous post)...
...hope that helps & good luck... TRIN is a fascinating indicator, you have to know how to use it though, and you have to see for yourself, so that you can gain a good understanding...it took me over a year to incorporate it into my trading, and to really understand it not just intraday as we discussed above, but for the swing ti intermediate term periods in order to forecast...you will need to use it in context of other indications and overall trend...
Fernando - Thanks again for the reply. So if you had choosen to buy pullbacks on Thursday, would you have used the TRIN to confirm your exits. In other words - would you have looked for an upward movement in the TRIN to confirm when to sell your INTRADAY long position, or do you feel like the correlation isn't strong enough to use it this way?
...Well, I probably wouldn't be looking only at the TRIN.... however, if in the middle of the long side trade, you had given me a strong upward move in the TRIN (especially to new high, or of there was a gap overhead on the TRIN itself)... it would definitely influence a decision to consider taking profit.... maybe tighten stop...or just be generally careful about that direction. try and observe it this coming week, and we can compare notes again...
...just for research, look at Monday 3/19.... use a 5-day 15min chart... notice that the TRIN closed a gap from 3/14 .... well, didn't close the gap, but hit the LOW point of 3/14...notice what time it happened....2:00pm est..... now pull up a chart of the Naz for that day...what time did it bottom? .... pull up a chart of the SPX....at that time, it was exactly on 618 Fib retrace (of the rally from 3/14) also it was a 2x bottom intraday.....overall short-term trend was up (over the last few days) ...... well that's enough evidence to get you off the short side and looking to buy despite the hi TRIN.... that's the kind of stuff that helps you defy the crowd psychologies...give you confidence and have some logic to justify your actions..... moves u from a trader taking arbitrary, weakly supported positions to a strong one.... from a knife catcher to someone who knows what he is doing....and that's just one way to do it.... there's so much to keep ya busy and out of trouble...keep studying, good luck...