The Arms Index (TRIN) has been around since the 1960s, combining advancing/declining stocks and their volumes into one sentiment gauge. Extreme readings often show up at market turning points, but how should investors actually use it today?
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Do you see TRIN more as a signal to buy or sell, or more as a risk management tool, a way to know when to reduce exposure, hedge, or take profits?
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TRIN spiked during March 2009 and March 2020, both major market bottoms. Looking back, do you think these were true actionable signals, or just coincidences in hindsight?
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Even with its flaws, could TRIN's greatest value be psychological-helping investors act when fear or euphoria are at extremes?
If you haven't read it yet, Wayne Thorp's latest article takes a deep dive into the TRIN's history, strengths, and limitations in today's algorithm-driven markets. Worth a look before weighing in: Using the Arms Index (TRIN) for Market Breadth Analysis.
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Jenna Brashear
AAII Community Manager
Chicago, IL
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