Option Investor
Trader's Corner

TRINQ, YM and EMA: What Do They Mean?

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A subscriber asked where he could find out more information about some the terms dashed off in the Market Monitor, the live portion of the Option Investor's site. A few terms and acronyms culled from a three-day period in early January included EIA, evening star, USDJPY and the term of the month: falling knives.

The best way to find out the meaning of a term employed by one of the writers on the Option Investor staff is to write Contact Support. Place the name of the writer in the "Subject" field and use the body of the email to ask the writer to clarify the term. Don't be shy about using this method. If you don't understand the term, chances are they many others don't, either. You'll be like the first warrior into battle, willing to take the bullet for those following you.

Most of us writers have been out there as subscribers at one time, too, so we won't really be taking pot shots at you for asking the wrong question. We'll be glad to clarify.

We'll do more in many cases. For example, a trader writing me to ask for a definition of an evening star formation would have been likely to find a chart attached to an email as well as a definition. (Note: The chart was snapped at Thursday's close and does not include current price action.)

Daily Chart of the NYSE with an Evening Star Formation:

In addition, a writer will often refer you to a website or book that will provide more information. Anyone writing me about a candlestick formation would certainly be referred to one of Steve Nison's books on candlestick charting, such as BEYOND CANDLESTICKS, just as anyone writing Jeff Bailey about a formation on a point-and-figure chart would likely be referred to Thomas J. Dorsey's book, POINT & FIGURE CHARTING. I bet Keene Little could refer you to one of his books on EW theory, and Jane has many favorites on market theory and controlling emotions.

Because of the way emails are handled on the site, however, you might seek other alternatives if you need a question answered quickly. In the past, I've received desperate questions about how OEX settlement value is calculated at three minutes before the close on Friday of option expiration week, and there's just not time to get an answer written and sent in time for the trader to make a decision based on that answer. If your question involves a trading-related issue and it's especially timely, your broker is the best person to contact.

If you need an answer quickly and you're fairly certain that the term relates to an economic number, another solution is available. If you don't understand the significance of the release and don't want to wait for answer from one of the writers, your broker can probably give you that information, too, but you can also find a definition for many such numbers at this link.

For example, a trader who was unfamiliar with the term "PPI" might want to know why it was so important week before last. Clicking through on "PPI" on this week's economic schedule returns the information that the Bureau of Labor Statistics releases this number. It's the Producer Price Index, and it provides information on the prices of goods at the wholesale level. The core PPI, in particular, helps measure whether inflationary pressures are present in the economy.

Not all terms relate to economic releases, of course, although many confusing ones do. Writers are often asked about the PPI, CPI, ISM, for example.

Sites such as Investopedia are great for providing quick definitions. Investopedia defined one of those terms listed above, "falling knife," as slang for a situation in which a security's price is plunging lower but may still lose more value. The term was employed quite often in the 2000-2003 period, usually when writers warned traders or investors against the dangers of attempting to "catch falling knives." One can be bloodied by such an attempt, creating a strong visual image of the dangers of attempting to catch a bottom in a security or market where prices have been falling hard over a short period of time. That term is being revived lately with good reason, isn't it?

Investopedia is a good place to start your search for information on unfamiliar terms, particularly if you're just interested in defining the term. If you're fairly sure the unfamiliar term might refer to an oscillator or other type of technical analysis tool, you might find more information at the Chart School at the www.stockcharts.com site. For example, it's on that site that you'll find a definition of TRIN or the Arms Index developed by Richard Arms. It's "[t]he advance/decline ratio divided by the advance volume/decline volume ratio." Moreover, you'll find charts that show you how the TRIN might be used to pinpoint extreme conditions in the market as well as giving some indication as to whether conditions are bullish or bearish. NYSE-listed stock's advancing and declining stocks as well as advancing and declining volume ratios are used to calculate TRIN. The same information from Nasdaq-listed stocks is used to calculate TRIN.Q.

Even if you've found a definition for the unfamiliar term or located information on how to use an indicator, you may not be able to find it through your feed provider. You'll have to check with that provider to find the symbol for the indicator or oscillator. For example, my provider's symbol for the advance/decline volume is JINT.Z. Go figure.

Last but not least, if you're using a great broker, as I do, that broker may be a great source of information. Should you worry about the FOMC's meeting? What's a "future" and should you consider trading it? How does this order page work anyway? All those are questions a knowledgeable broker might help you answer.

When I originally decided to write this article, my intention was to cull all terms that might prove unfamiliar to new subscribers from a week's worth of Market Monitor posts and define them all. That proved impossible. Writing about the advance/decline line itself would have required an entire article. I hope these few sources will prove helpful so that when you encounter an unfamiliar term, you'll be able to find the answer for yourselves.

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