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Home/Forex Programming/Is the Arms Index for You?
arms index forex indicator, expert advisor programmer, mt4 programmer, forex programmer, ea programmer, mt4 programmers, forex ea programmers, expert advisor programmers, ea programmers, mql4 programmer, mql4 programmers, metatrader programmer, mql programmer, forex programmers

Is the Arms Index for You?

Suppose you want to make a list that compares the advancing issues to the declining issues in the foreign exchange market. Alongside, you are interested in the trading volume so you use it as an indicator of the market sentiment, as well as the levels of supply and demand. And, you prefer to accomplish all these tasks on an intraday basis. In such a case, why not be familiar with the Arms Index? It’s recommended to you.

Table of Contents

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  • The Arms Index 101
  • Calculating the Values
  • Important Considerations
  • Go one step further with these related books:
  • Recommended links:

The Arms Index 101

The Arms Index is a volume-based indicator; it was developed by the popular intraday trader, Richard Arms, in 1967. It allows you to gauge market strength and market breadth by interpreting the advancing issues and declining issues; if the 2 subjects come with relative value and volume, their relationship can be determined.

Another name for the Arms Index is TRIN (i.e. an acronym for “TR”ading “IN”dex). It follows that the result of the indicator can be used to study market conditions. While those that return values below 0 are indicative of bullish conditions, index values that are above 0 are indicative of a bear market. And, if the values remain in the 0 line, it is suggestive of a balanced market.

Calculating the Values

The calculations for the Arms Index start by observing market activity and identifying 4 values: (1) advancing issues, (2) declining issues, (3) volume of advancing issues, and (4) volume of declining issues. Once all the values are identified, you can begin.

The Arms Index requires a result from 2 equations. For the 1st equation, divide the advancing issues by the declining issues; for the 2nd equation, divide the volume of advancing issues by the volume of the declining issues. Finally, divide the quotient of the 1st equation by the quotient of the 2nd equation.

**representations: AI = advancing issues; DI = declining issues; AIV = volume of advancing issues; DIV = volume of declining issues

The formula:
TRIN = (AI ÷ DI) ÷ (AIV ÷ DIV)

Important Considerations

While it is a reliable volume-based indicator and market activity analyzer, the Arms Index can yield problematic values if certain considerations are not kept in mind. Specifically, in the event that the trading volume is insufficient, making a calculation is rather impossible, since 0 volume is suggestive of an undefined equation. However, granted that you take note of possibly flawed results, and you know your way around market activity, you can expect great trading days with the particular indicator.

For other top Forex indicators, check a complete list here: 
Most important Forex indicators

Go one step further with these related books:

  • Forex For Beginners
  • A Three Dimensional Approach To Forex Trading
  • Understanding Price Action: practical analysis of the 5-minute time frame
  • Quantitative Trading with R: Understanding Mathematical and Computational Tools from a Quant’s Perspective
  • The Death of Money: The Coming Collapse of the International Monetary System
  • Economics of Monetary Union

Recommended links:

  • FX Street – Forex Education
  • Babypips.com – Learn Forex Trading
  • Bloomberg – Currency
  • Market Watch – Currencies
  • Investing.com – Forex

Written by:
Zahir Shah
Published on:
June 17, 2016
Last Updated:
December 19, 2019
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Categories: Blog, Forex Programmer, Forex Programming, Forex Trading

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