TRIN Indicator - ARMS Index | PowerOptions Web Log
The TRIN is a market sentiment indicator. The TRIN indicator is generally used to signal overbought or oversold market conditions and is religiously monitored by some option traders. The formula for the TRIN is: (Advancing issues/declining issues) TRIN = ———————————– (Advancing volume/declining volume) Used? The originator of the TRIN, Richard Arms, considers the market to be overbought when the 10-day moving average of the TRIN is below 0.8 (time to go short) and is oversold when the TRIN is above 1.2 (time to go long). The TRIN indicator is highly volatile, so typically a moving average of the value is used for making buy/sell decisions for option investing. Previous Year’s Performance Examining the performance of the TRIN compared to the SPY ETF over the previous year yields the following graph: From this graph, the TRIN is observed to pass the 1.2 threshold value four times and breach the 0.8 threshold...
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