Nifty TRIN Chart

The TRIN, the TRader’s INdex or Arms index, is a short-term technical analysis stock market trading indicator. The name is short for TRading INdex. Please note that or any its employees are not responsible for any profit or loss occurred due to usage of these charts.

Nifty TRIN 10 Day SMA Chart

Chart courtesy: ICharts

How To Trade With TRIN?

Also known as the TRIN or Short-Term TRading INdex, the Arms Index is a breadth indicator developed by Richard W. Arms in 1967. The index is calculated by dividing the AD Ratio by the AD Volume Ratio. Typically, these breadth statistics are derived from NSE or BSE data, but the Arms Index can be calculated using breadth statistics from indices such as the Nifty or Sensex. Because it acts as an oscillator, the indicator is often used to identify short-term overbought and oversold situations. A moving average can also be applied to smooth the data. The terms Arms Index and TRIN are used interchangeably in this article.

Calculation: TRIN = (advances / declines) / (up volume / down volume)

  • Advances: number of stocks in the index that closed up on the day
  • Declines: number of stocks in the index that closed down on the day
  • Up Volume: total volume of advancing stocks
  • Down Volume: total volume of declining stocks

As a ratio of two indicators, the Arms Index reflects the relationship between the AD Ratio and the AD Volume Ratio. The TRIN is below 1 when the AD Volume Ratio is greater than the AD Ratio and above 1 when the AD Volume Ratio is less than the AD Ratio. Low readings, below 1, show relative strength in the AD Volume Ratio. High readings, above 1, show relative weakness in the AD Volume Ratio. In general, strong market advances are accompanied by relatively low TRIN readings because up volume overwhelms down volume to produce a relative high AD Volume Ratio. This is why the TRIN appears to move “inverse” to the market. A strong up day in the market usually pushes the Arms Index lower, while a strong down day pushes the Arms Index higher.

The Arms Index is a volatile breadth indicator that can be used to generate overbought and oversold signals. It is preferable to trade in the direction of the underlying trend (major trend can be derived from the slope of 100 or 200 day moving averages). Short-term traders can use the unadulterated Arms Index to generate short-term signals. A 10-day SMA can be applied to generate more medium-term signals. The Arms Index is just one indicator and chartists should employ other ascpects of technical analysis to confirm or refute signals generated.

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