Many of our readers requested how to trade trin. Here is an extract from “Mastering the Trade – John.F.Carter” about his knowledge on TRIN. Most Educational material on “How to use the Trin”. tell traders that “over 1.0 is bearish, so consider shorting and under 1.0 is bullish so consider buying” That statement is annoying and misleading, and it brings me to first rule when to use trin
I dont care what the current reading is
I only care about the current reading in relation to where it has been
If the trin reading is trending higher and making higher highs on the day
I will ignore all the long setups
If the trin reading is trending lower and making lower lows on the day
I will ignore all the short setups
Historical 10 day SMA of trin values indicates that anything above 1.5-2 indicates Heavily oversold levels where bounce back is possible towards 1. When 10 day SMA of trin starts dipping from such oversold levels we can safely assume that short covering gonna take place.