Arms Index (TRIN)

The Arms Index, better known as TRIN (short for TRading INdex), is a market breadth indicator that compares the number of advancing and declining stocks with the volume flowing into each group. Richard Arms introduced it in 1967. It answers a simple question: is volume going where the stock count says it should, or is it concentrated in the winners or the losers?

Unlike most breadth indicators, TRIN moves opposite to the market. Strong buying pushes it down and heavy selling pushes it up, so many traders read its chart upside down.

How it is calculated

Advance/Decline Ratio = advancing stocks / declining stocks
Up/Down Volume Ratio  = volume of advancing stocks / volume of declining stocks
TRIN                  = Advance/Decline Ratio / Up/Down Volume Ratio

A reading of 1.0 means volume is split in proportion to the number of rising and falling stocks. Below 1.0, advancing stocks are drawing more than their share of volume, which is a sign of buying pressure. Above 1.0, declining stocks are drawing more than their share, a sign of selling pressure.

Daily readings are noisy, so TRIN is usually smoothed. The common choice is a 10-day moving average. A variation called the Open-10 TRIN (or Open Trading Index) sums each of the four components over 10 days first and then does the division. That stops a single extreme day from dominating the average, and the two smoothed versions give somewhat different levels.

How to read it

• Above or below 1.0. A daily reading below 1.0 shows buying pressure and above 1.0 shows selling pressure. During the session, traders watch it to judge whether a move in the index is broad and backed by volume.
• Panic spikes. A daily reading above about 2.0 shows one-sided, heavy selling. Such panic often exhausts sellers, so traders who use TRIN as a contrarian tool treat spikes like this as a sign that a short-term low may be near.
• Exuberant lows. A daily reading below about 0.5 shows very one-sided buying. Early in a rally that can be a sign of a strong thrust; after a long advance it can warn of a short-term pullback.
• Smoothed overbought and oversold. With a 10-day average, readings well above 1.0 are read as oversold and readings well below 1.0 as overbought. The exact levels depend on the index and the smoothing, so compare a reading with the past extremes of the same series.
• Confirmation. A rising index with a TRIN that stays below 1.0 has volume behind it. An index that rises while TRIN climbs above 1.0 is being lifted by a few stocks on light volume.

Settings and common mistakes

• Forgetting it is inverted. A rising TRIN is bearish pressure, not strength. Reading it the wrong way round is the most common mistake.
• One set of levels for every index. TRIN on a broad exchange behaves differently from TRIN on a narrow, cap-weighted index like the Dow, where a few heavy-volume stocks can swing the ratio. Typical levels also differ between NYSE and Nasdaq stocks.
• Its built-in skew. Because TRIN is a ratio, selling days can push it far above 1.0 while buying days can only pull it towards zero. Averages therefore tend to sit a little above 1.0, and high readings come more often than low ones.
• Using it alone. TRIN is a short-term gauge of pressure. Pair it with the trend of the index and with slower breadth measures such as the Advance/Decline Line.

Live chart: the NYSE Composite index, daily, with the Arms Index (TRIN) of its members. The chart updates every trading day.

Screen for it on MarketInOut

Our formula language has the Arms Index as trin. It is calculated from an index’s members, so it works as a market filter with @index or on the index symbols themselves, and avg(trin, 10) gives its 10-day average. Stocks in a long-term uptrend that have pulled back while the NYSE’s 10-day TRIN shows selling pressure (otherwise the screen returns nothing):

exch(nyse,nasdaq) and type(stock) and price > 1 and advol(21) > 1
and (avg(trin, 10) > 1)@nyse and price > sma(200) and rsi(14) < 40

Major US indexes whose 10-day TRIN is above 1.0:

ticker(dow.i, sp500.i, nasdaq.i, nyse.i, nasdaq100.i, russell2000.i)
and avg(trin, 10) > 1

Related: Advance/Decline Line, McClellan Oscillator, New Highs - New Lows.