Trading based on the TRIN, or Arms Index

By 4 February, 2018Futures

The TRIN or Arms index was developed by Richard Arms in the 1970’s. It is a short-term technical analysis indicator based on the advancing and declining stock issues and trading volume data. The name is short for Trading Index.

I tested many entries and Indicators using TRIN Index for the E Mini 500 futures and most were favorable. However, I saw the best results using RSI as shown below. The edge will work similarly good if you use ETF’s like SPY.

Here are the high-level test results for the edge and the equity graph. You may further test, analyze and improve the edge using different filters and exits.

Baseline Model Rules   (Are you interested in code and workspace for Tradestation?)

1.The average of TRIN Daily Midpoint (34 period) should be more than the upper band of its Bollinger band.

TRIN Daily Midpoint & Bollinger band defined below:
TRIN Daily Midpoint: [(high – low)/2]
Upper Bollinger Band: (TRIN Daily Midpoint, 2 days, 0.5 SD)

2.If the RSI indicator for a 2-day period is lower than 25, then buy at close.
3. Exit: If the RSI indicator for a 2-day period is more than 70, then exit at market.