Arms Index (TRIN)
The developer of Arms Index is Richard Arms who created it in 1967. For years, this index got many various names. They called it the Short-term Trading Index after the first article by Barron in 1967. It is also called TRIN, which is an acronym for TRading INdex.
The Arms Index demonstrates the dependence of the volume connected with stocks increasing or decreasing in price, the so-called advancing/declining volume, and the stocks increasing or decreasing in price, the so-called advancing/declining issues.
The calculation is the following:
Arms index = (Advance/Decline Ratio)/(Upside/Downside Ratio)
A value over 1.0 means more volume in declining issues and is negative. A value below 1.0 demonstrates more volume in rising stocks and is positive. The Arms Index is an opposite indicator trending in the opposite market direction. You can use it for the day's trading by following its direction and for detecting signals of short-term market extreme. The Arms says that a ten-day average of the Arms Index above 1.20 is supposed to be oversold, and a ten-day Arms value lower than 0.70 is supposed to be overbought, though these figures can change depending on the general market trend.