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Joined: 1/29/2006
Posts: 6
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TRADERS’ INDEX (TRIN)
I would like to have this index constructed for me as one of my custom indicators in my TeleChart 2005 software. It is a very popular indicator. I have found the following reference material which can be found in:
· Trading For a Living by Dr. Alexander Elder
· Technical Analysis of the Financial Markets by John Murphy
· Technical Analysis from A to Z by Steven B. Achellis
The Traders’ Index (TRIN) is a leading stock market indicator. It shows when major rallies and declines get ready to reverse by measuring the intensity of optimism for the dominant market group. Excessive optimism is associated with market tops and excessive pessimism is associated with market tops and pessimism with bottoms.
TRIN measures the ratio advancing to declining stocks and compares it to the ratio of advancing to declining volume.
How To Construct the TRIN
You need four pieces of data to calculate the Traders’ Index: the number and volume of advancing and declining stocks as well as the volume of both groups. These figures are released by the New Yord Stock Exchange and several other exchanges throughout each trading session.
TRIN = Advancing Issues * Advancing Volume
Declining Issues * Declining Volume
(I hope you can understand the above symbol is a (division) sign. The formula is supposed to read “Advancing Issues” over “Declining Issues) (divided by) “Advancing Volume” over “Declining Volume”). The discussion board is not letting me "paste" the formula exactly as it is. I hope you understand as I have written it in words.
TRIN compares the relationship between the ratio of advancing and declining stocks and the ratio of advancing and declining volume. If 1000 stocks rally on a volume of 100 million shares, and 1000 stocks decline on volume of 100 million shares, then TRIN equals 1. If 500 stocks go up on a volume of 150 shares and 500 stocks go down on a volume of 50 million shares, TRIN remains 1.
TRIN falls when the volume of advancing stocks is disproportionately high, compared to their number. TRIN rises when the volume of declining stocks is disproportionately high, compared to their number.
The volume of advancing stocks often swells out of proportion to their number during rallies. If the ratio of advancing to declining issues is 2:1, but the ratio of advancing to declining volume is 4:1, then TRIN equals 0.50 (2/1 + 4/1). A low TRIN shows that bulls are highly optimistic, a rally is being overdone, and top is near.
When the market falls, the volume of declining stocks often swells out of proportion to their number. If the ratio of advancing to declining issues is 1:2, but the ratio of advancing to declining volume 1:4, then TRIN equals 2 (1/2 + ¼). A high TRIN shows that bears are too optimistic, too much volume goes into the declining stocks, a decline is being overdone, and the market is nearing a bottom.
TRIN can change sharply for day to day. TRIN gives better signals when it is smoothed with a moving average. You can use a 13-day exponential moving average of daily TRIN. It filters out the noise of daily swings and shows the true trend of this indicator.
Plot TRIN on an inverted vertical scale. Low numbers on the top identify market peaks, and high numbers at the bottom identify market lows. Two horizontal reference lines mark overbought and oversold levels. When the TRIN rises above its upper reference line, it shows that the stock market is overbought and nearing a top. When the TRIN falls below its lower reference line, it shows that the market is oversold and nearing a bottom.
The level of reference lines depends on whether the stocks are in a bull or bear market or a neutral trading range. The overbought line is usually is placed at 0.65 or 0.70 in bull markets, 0,70 or 0.75 in bear markets. The oversold line is placed at 0.90 or 0.95 in bull markets, and 1.00 or 1.10 in bear markets. These levels may shift by the time you read this book – use them as a starting point for your own research.
Thank you very much
Otis C. Johnson
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Worden Trainer
Joined: 10/1/2004
Posts: 4,308
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Please jump to ticker symbol TRIN-X. See if this isn't what you're looking for.
- Doug
Teaching Online!
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