Trading Index (TRIN) – Formula, Calculation & Trading Strategy in Python

Short-term mean reversion trading on equity indexes is a popular trading style. Often, price-based technical indicators like RSI, CCI are used to assess if the stock market is in overbought or oversold conditions. A new research article written by Chainika Thakar and Rekhit Pachanekar explores a different indicator – TRIN, which compares the number of advancing and declining stocks to the advancing and declining volume. TRIN’s advantage is that it’s cross-sectionally based and its calculation uses not only price but also volume information. Thakar& Pachanekar’s research paper is useful for fans of indicator’s based trading strategies and offers a short introduction to TRIN’s calculation together with an example of mean-reversion market timing strategy written in a python code.

Authors: Chainika Thakar, Rekhit Pachanekar

Title: Trading Index (TRIN) – Formula, Calculation & Strategy in Python

Link: https://blog.quantinsti.com/trin/

Abstract:

In order to assess the strength of the market, Richard W. Arms, Jr. invented the TRIN index in 1967, and it is used for measuring the relationship between market supply and demand. The TRIN index is successfully used to find out the market sentiment. Moreover, future price movements are indicated by TRIN since it generates overbought and oversold levels to find out when the price index may change direction. Based on the value of TRIN, a trader can find out if there is an upward or downward trend in the market and can make decisions to trade accordingly. TRIN can be calculated in Python in an efficient manner. We will use TRIN along with bollinger bands to create a trading strategy which generates signals of buy and sell according to the crossover of these indicators. We use the S&P500, DJI and NASDAQ-100 price data in this strategy and find that it generates a decent return with low maximum drawdowns. This will be beneficial for traders who prefer low risk.


Are you looking for more strategies to read about? Sign up for our newsletter or visit our Blog or Screener.

Do you want to learn more about Quantpedia Premium service? Check how Quantpedia works, our mission and Premium pricing offer.

Do you want to learn more about Quantpedia Pro service? Check its description, watch videos, review reporting capabilities and visit our pricing offer.

Are you looking for historical data or backtesting platforms? Check our list of Algo Trading Discounts.


Or follow us on:

Facebook Group, Facebook Page, Twitter, Linkedin, Medium or Youtube

Share onRefer to a friend

Subscribe for Newsletter

Be first to know, when we publish new content


    logo
    The Encyclopedia of Quantitative Trading Strategies

    Log in

    SUBSCRIBE TO NEWSLETTER AND GET:
    - bi-weekly research insights -
    - tips on new trading strategies -
    - notifications about offers & promos -
    Subscribe