Excerpt from: Day trading newsletter Issue No. 002
Using the Trin (Arms Index)
From: Timothy
What do you mean by the Trin...i'm not familiar
with this?
~~~Christopher's Response~~~
Also known as The Arms Index, the Trin is an acronym that
stands for Trading Index
Simply put, the Trin measures volatility within the stock
market. The Trin also has an inverse relationship with the
Tick. In contrast to the Tick, a rising Trin signals that
the Bears are beginning to take control. Likewise, a falling
Trin tells us that the Bulls are taking control of the
direction of the market.
Advancing Issues / Declining Issues
----------------------------------------------------
Advancing Volume / Declining Volume
This formula, like the Trin itself, helps us to descern
whether volume is flowing into advancing or declining issues.
The Trin will read under 1.0 when advancing stocks are the
major source of volume and above 1.0 when declining stocks
are the predominant source of volume flow in the market.
Translation:
A rising Trin depicts a weak market and a falling Trin
depicts a strong market.
The CCI is an excellent oscillator that can help us identify
whether a stock is oversold or overbought. The CCI oscillates
between -100 and +100. A reading above +100 shows us that the
stock is probably overbought. A reading below -100 shows us
that the stock is probably oversold. In practice, if an
uptrending daily chart is oversold, you now have one more
reason to be bullish on the stock.
As for my use of the S&P futures, I use a five and fifteen
min chart with 20 and 200 MA's. S&P futures are the primary
indicator used by traders throughout the trading day, so I
would not recommend that you trade without them.