Trade to Win - Proven Strategies to Make Money

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Commonsense Market Indicators 57

pullback. If I buy when the tick is so hot, I may be buying at the top—not a

position I want to be in.

Although I consider the NYSE tick to be important, it is only one of the

indicators that I track. I view the tick data in conjunction with the Seven

Sisters and the other indicators discussed in this section.

Like the NYSE issues, this indicator functions only when the NYSE is

actively trading. It cannot be used during the evening or night for guidance.

However, like the issues, at times the market’s mood will be so strong that

the indicator can be used to judge general market sentiment.

The TRIN

The TRIN, also known as the Arms Index or Trading Index, measures vol-

ume and the previous day’s close. The TRIN is a ratio of ratios. It is calcu-

lated as follows:

Advancing Issues/Declining Issues

Advancing Volume/Declining Volume

The TRIN is a contrary indicator. That is, the more positive the reading,

the more negative the market’s sentiment. A TRIN of 1 is considered neu-

tral. That is, there are about as many buyers as sellers. As the NYSE Tick

moves up, the TRIN moves down. The TRIN may go as high as 3.5 or as

low as 0.30. Between 1.20 and 0.80 tends to be a noise zone in which no di-

rection is indicated. When watching the TRIN, look at relative price action

and not absolute value. For example, if the TRIN is 1.5 and it moves to 1.2,

the direction is bullish even though the absolute value is slightly bearish.

Again, I consider this indicator in relation to the other indicators that I

monitor. I never make a trading decision on the basis of the TRIN alone. It

is part of my overall analysis. It is one piece of a larger puzzle. There have

been occasions when the TRIN has saved me from making a big mistake.

Some of the other indicators were pointing in one direction, but the TRIN

was giving a contrary message. I hesitated to act in haste and the TRIN’s

warnings saved the day.

The V-Factor and the TTICK

In addition to the indicators used by most traders, I also have two propri-

etary indicators that I created. One of them gauges momentum and one

volume. The V-Factor tracks momentum as traders enter the market. Most

experienced traders use volume data in some manner when they trade.