This article is from the Glossary of Technical Analysis Terms.
Some analysts believe that price analysis alone only offers half the information needed for successful trading. The other part is time, more exactly time cycles, which give actual insight into understanding the movements of markets. Common cycles are the seasonal cycles apparent in many commodity markets, but cylces can be detected on intra-day charts as well.
This index (also kown as the "Arms" index, or "TRIN") measures the relative strength of volume associated with advancing stocks against the strength of volume associated with declining stocks. When used as a short term indicator, readings below 1.0 are considered bullish while readings above 1.0 are considered bearish. An extreme bearish reading would be 1.5 or higher; an extreme bullish reading would be .5 and lower. Readings of 2.0 or .3 would be considered "climactic". For the intermediate term, a bearish sign is an index over 1.0, bullish under 1.0. For the long term, the Trading Index can be viewed as an overbought / oversold indicator.
Single linear exponential smoothing was developed in the early 1950s as a means of prediction along a straight line whose slope was based on previous data. The Triple Exponential Smoothing Oscillator (Trix) has now been developed to act on trends of a higher order than linear. Trix uses a one-day momentum of a triple exponential smoothed price series to produce an indicator which is cycle dependent. Changes in the Trix direction are less prone to whipsaws than standard cycle-momentum indicators. The period is chosen to filter out any insignificant cycles shorter than the period. Fourier Analysis or visual observation may be used to find the proper cycle length of a given market. Raising the number of days will remove more small cycles and smooth out the oscillator, but at the loss of sensitivity. The more smoothing that is applied to the data, the more of a lag in the oscillator, but not nearly the lag of a normal moving average.