Arms index

The Arms Index, also known as TRIN, an acronym for TRading INdex, was developed in 1967 by Richard Arms. It is a volume-based indicator, which determines market strength and breadth by analysing the relationship between advancing and declining issues and their respective volume; it is used to measure intra-day market supply and demand, and it can be applied over short or longer time periods.

The index is calculated using the following formula:

Arms index or TRIN= (number of advancing issues)/ (number of declining issues) (Total up volume)/ (total down volume).

An index value of 1.0 indicates that the ratio of up volume to down volume is equal to the ratio of advancing issues to the declining issues. The market is said to be in a neutral state when the index equals 1.0 since the up volume is evenly distributed over the advancing issues and the down volume is evenly distributed over the declining issues.