NOTE*** This post is part of an ongoing project to update my “How I Pick Stocks” page on the sidebar to the left. For every new section/update that I make to the page, I will post addition here as a post as well as amend the page itself so that all the information can be read together.
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I use TRIN as an intra-day market internals indicator. And while I never use it as a basis for entry on its own, I do like to keep tabs on how it is moving throughout the day.

For the most part, I look to the TRIN for confirmation of a developing trend. It’s not so important to understand how the TRIN is calculated. What you need to focus on is the Trend of the TRIN. One way to do this is by drawing some rough channels around the TRIN.

Below is a chart of yesterday’s price action & TRIN:

As you can see, the day started off with the TRIN in an upward channel. When this happens, look for the market to be falling. When I saw this confirmation in the morning, it gave me the extra reassurance that I needed to go short.

However, around 11:00 E.S.T. you can see tha the TRIN peaked and then sort of chopped around for the next 1.5 hours. During that time, you can see that the price chopped around as well and slightly grinded higher. One thing worth noting here is that when you see the TRIN trending sideways with the market moving slightly higher, this can often be a lead indication of the next move. Again, you don’t want to go placing any trades based purely off of this theory, but you can use that knowledge to your advantage in the context of your overall tradin strategy.

Well a little after 12:30, you can see that the TRIN finally broke down below its sideways channel and price also jumped higher. For the rest of the day, price trended up, while the TRIN trended down.

This kind of analysis is easy to do in hindsight but often a little trickier to do in the heat of the moment. During the day, I will monitor these types of channels, but since the TRIN is more of a secondary indicator for me I use alerts to notify me of any significant changes versus watching it like a hawk. I do so in this manner:

I start out by waiting for at least 1/2 hour after the markets open for an initial range to develop. I’ll then mark off the high and the low of the range as in OA & OB. Once a line is crossed, I then delete it and use the remaining line as a Reversal Confirmation Line. The TRIN would then have to close beyond the remaining line for the signal to change.

So in the morning you can see a fake breakdown below OB. I would interpret that as to say that the TRIN was breaking down below its channel. However, a few minutes later the TRIN then reversed and closed above OA, invalidating the original breakdown and signifying a new upside break. The TRIN would then have to close back down below OB again for the signal of the TRIN to change.

Once the upside breakout occured, I would then wait for a new channel to develop before marking off a new high at 1A. Until this occured, I would keep my current reversal line at OB intact.

When 1B was violated, I would then leave 1A intact as a reversal signal and wait for a new channel to develop before drawing my next lower-boundary line. When I drew 2B, I was marking that area off as my new lower-boundary but still I kept the reversal signal at 1A until 2B was violated to the downside. Only then would I lower my reversal point to 2A.

Likewise, only after the downward violation of 3B would I lower my reversal line from 2A to 3A. I use an audio alert in TradeStation to alert me whenever the TRIN closes above or below the current boundary lines. This frees up my attention to focus on more important matters.

When the TRIN is trending up, I’ll approach my long entries with much more caution than I would if the TRIN were trending down; and Vice-versa. It’s certainly no holy grail, but when used in the proper context can definitely be an aid to any trader’s toolbox.

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