Trading with the Better TRIN Indicators

This is the second article in a series about the TRIN (Trading Index). The first article covered the 4 steps required to make a Better TRIN Indicator. This article shows how this indicator can be used to pin-point market turning points with divergence patterns and introduces the invaluable Better TRIN Oscillator.

TRIN divergence patterns first …

Divergence patterns on the TRIN occur when the market advances but the adjusted TRIN value is negative or vice versa. Since the TRIN re-sets at the beginning of each day, a market advance is assumed to be when the Close is greater than the Open.

These TRIN divergence patterns are shown on the chart below as red and white dots on Emini daily bars. Looking back on the chart you can see how well this single indicator warns of potential market turning points. I don't use this indicator alone but combine it with other non-correlated market indicators to confirm turning points more accurately.

Trading Index TRIN Divergence Image

TRIN Divergence Patterns and Market Turning Points

Now for turning the TRIN into the ultimate oscillator …

You can build a very useful oscillator by cumulating the adjusted TRIN readings and then measuring the distance from a moving average. I then use some simple mathematics to sharpen up the turning points and make the indicator crystal clear to interpret. The Better TRIN Oscillator is shown on the chart below, plotted beneath daily bars of the Emini.

Trading Index TRIN Oscillator Image

The Better TRIN Oscillator

As you can see from this chart this Better TRIN Oscillator does a good job of measuring market momentum - and remember in the TRIN calculation there is no measurement of price, only the number of advancing/declining issues and advancing/declining volume. Note the early warnings of trend changes in mid July and mid August 2007 when bearish and bullish divergence patterns signaled an important market top and bottom.

The oscillator is truly a leading indicator and very powerful. Turns in the Better TRIN Oscillator are shown on the chart below as red and white dots on the Emini daily bars. Looking back on the chart you can see how well this indicator alone confirms market turning points.

Trading Index TRIN Turning Points Image

Emini Turning Points using the Better TRIN Oscillator

Rather stick with your familiar RSI indicator?

To see how clear the signals are using the Better TRIN Oscillator, compare it to the commonly used RSI. Daily Emini bars are shown at the top of the chart below, then the Better TRIN Oscillator and at the bottom of the chart is the built-in TradeStation version of the RSI. There's no comparing the sharpness of the TRIN Oscillator signals. I know which indicator I'd rather be using!

RSI Comparison Image

Better TRIN Oscillator vs. RSI

The Better TRIN Oscillator also works on intra-day charts

If you're a day trader you can also use the Better TRIN Oscillator on intra-day charts. Any bar interval can be used. The chart below shows the Oscillator superimposed on 5 minute Emini bars. The sharp tuns in the Oscillator make it easy to interpret.

TRIN Oscillator for Daytrading

Better TRIN Oscillator on 5 minute Emini chart

Again compared to the RSI indicator the Better TRIN Oscillator is so much clearer. The chart below includes the 7 bar RSI (built-in TradeStation version) for comparison. Remember the TRIN Oscillator does not include price in the calculation and so can be used as a non-correlated, confirming indicator.

TRIN Oscillator Compared to RSI for Daytrading

Better TRIN Oscillator vs. RSI on Intra-day charts

The Better TRIN Indicator Package (Intra-day and End-of-day charts)

The 4 Better TRIN Indicators introduced on this page are now available for sale and immediate download. The Better TRIN Indicator Package includes:

Better TRIN, an easier-to-interpret version of the classic TRIN indicator

Better TRIN ShowMe, an indicator that highlights TRIN divergence patterns and high probability entry points

Better TRIN Oscillator, for measuring trend direction and buying / selling strength without the use of price, works on both end-of-day and intra-day charts

Better TRIN Oscillator ShowMe, an indicator that identifies Oscillator turning points

Plus a bonus - 5 Example Systems for swing trading the Emini. These systems have profit factors of 4.62, 4.89, 4.88, 2.07 and 6.30! Check out a recent TRIN Systems update here

Word document containing all the EasyLanguage code so you can see how the indicators work, edit them and translate them for other charting packages

Excel spreadsheet showing how the Better TRIN indicators can be calculated using free, end-of-day data from www.StockCharts.com

All indicators are written for use on the TradeStation platform in unprotected / open EasyLanguage code. Check out the installation instructions and day trading videos here or the FAQ here.

Click on the following link to read an article about how the Better TRIN Indicators signaled a recent Emini turning point and captured over 30 Emini points in profit.

Better TRIN Indicator Package $67 (USD)