Indicator of the Stock Market that You Never Heard
Is the Market All Set for U-turn in Price Direction?
There are many tools for stock investors to use, when they decide where should invest the money.
However, discovering great companies is just half of this process.
For example, if you buy a high priced stock of yet a great company, it may disappoint you. However, the strategy to buy a stock at a lower price and allow the market to have an opportunity to discover the gem as well.
On the other hand, if you buy following all the smart capital has bought in, remember one thing at this level there will be little opportunity for growth. This usually happens whenever the market has become over-bought.
A stock market becomes over-bought when investors have had bid up their stock prices, which generally leaves just one direction that is “down” of stock prices.
So, how can you judge, when a stock market is, in over bought position?
One method is check out an index, by which you are able to know whether more fud is coming into soaring stocks are dropping stocks.
The second method is the TRIN index, which tells how much volume in advancing shares and declining shares.
A third method is Arms index, Richard Arms built this index, by which you can measure the over sold or over-bought position of the market.
When a stock market is in an over – bought position, that’s mean prices have increased sharply, it is an indication that the market is ready for a downside reversal. Similarly, when a stock market is in over-sold position, investors are expected to jump on a deal and over turn the decline in stock price.
In other words, you can say the TRIN index could tell you that the market is near the reversal.
By this calculation you can determine the TRIN index:
[(Soaring issues/dropping issues) / (Soaring volume/dropping volume)]
The TRIN index utilizes volume of soaring and dropping shares to determine the position of the market.
The TRIN index of one means there is the same stress on the over-sold and bought indicators, that is another method of saying the stock’ market is heading nowhere.
An index is contrary to usual thinking. This means whenever the index is advancing it is a bear sign and whenever the index of stock market is below one , it is a bull sign.
Investors may use a ten day average moving to measure which way stock prices might be headed. Day traders also use the index to observe reversals in the intra-day prices.
There are many sites where you may find the TRIN, For example “StockCharts.com”.
The market indicators which help investors to judge the best time for buying and selling short stock .TRIN/Q and TRIN.
The indicators like TIKI, TICK, and VIX are recommended to read.