Arms Index (also known as the Short-Term Trading Index or TRIN) is a technical analysis indicator used to measure market breadth and investor sentiment. It is calculated by dividing the number of advancing stocks by the number of declining stocks, and then dividing that result by the advancing volume divided by the declining volume. The Arms Index is used to gauge the overall strength or weakness of the market by comparing the volume of advancing and declining stocks. A reading above 1.0 is considered bearish, indicating selling pressure, while a reading below 1.0 is considered bullish, indicating buying pressure.
The Arms Index, also known as the TRIN (short for Trading Index), is a technical analysis tool used in the stock market to measure the relationship between the number of advancing and declining stocks and the volume associated with those stocks. It is calculated by dividing the ratio of the number of advancing stocks to declining stocks by the ratio of the volume of advancing stocks to declining stocks.
The Arms Index is primarily used to determine market breadth and to identify overbought or oversold conditions in the market. A value below 1 indicates that more volume is associated with advancing stocks, suggesting a bullish market sentiment. Conversely, a value above 1 suggests that more volume is associated with declining stocks, indicating a bearish sentiment.
While the Arms Index is widely used by traders and investors, it is important to note that it is a technical analysis tool and should not be solely relied upon for making investment decisions. It is recommended to use the Arms Index in conjunction with other indicators and analysis methods to gain a comprehensive understanding of market conditions.
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This glossary post was last updated: 29th March 2024.
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