Trading Index, a technical measure of advances and declines within the market. TRIN takes into account the number and volume of issues that advanced in price, and the number and volume of issues that declined in price. This index measures the relative strength of volume associated with advancing stocks against the strength of volume associated with declining stocks.
Exact AFL formula for TRIN is:
ArmsIndex = ( AdvIssues() / DecIssues() ) / ( AdvVolume() / DecVolume
A TRIN value of 1 indicates that the ratio of up volume to down volume is equal to the ratio of advancing issues to the declining issues and the market is in a neutral condition. A neutral condition simply means that the up volume is equally distributed over the advancing issues and that the down volume is equally distributed over declining issues for the day.
This indicator, although simple in its formulation, requires much study in its application. There are many variations applied to the TRIN. Many analysts use a 10-day moving average of TRIN as an indicator. AmiBroker plots two different averages for TRIN with the default averaging periods of 15 and 45. A reading of less than 1.0 usually indicates a bullish demand while a reading greater than 1 can signify a bearish market condition. It must be kept in mind that the indicator behavior and its reading and interpretation depends on whether the market is in a bullish or bearish phase. The actual time duration of this market phase must also be considered. Do not attempt to make and buy or sell decisions based on movements of this indicator by itself.