Trading Tools and Tactics by Greg Capra

Author:Greg Capra
Language: eng
Format: epub
ISBN: 9781118098554
Publisher: John Wiley & Sons
Published: 2011-06-17T16:00:00+00:00

The TRIN readings are actually calculated by dividing the advance-decline ratio by the advance-decline volume ratio (see Figure 8.7). If that sounds a little confusing, let's back up a minute and take a simpler approach to how the TRIN readings are calculated and this will also show you why it is such a valuable new piece of information. Perhaps you have heard of the more common indicator that is typically discussed, the advance-decline line. The A-D line simply shows the number of advancing stocks minus the number of declining stocks, and that value is added to the prior. This continues continuously, which plots the line. If there are an equal number of advancers as compared to decliners, the advance-decline line will be 0. The A-D line is a very commonly quoted statistic on the market, you may even hear it mentioned on CNBC during the trading day.

Figure 8.7 The Formula for the TRIN

Chart courtesy of Mastertrader.com.

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