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Aroon Indicator -how to use Aroon Indicator
- 1. Chapter – 2 AROON INDICATOR
- 2. Aroon Indicator • The Aroon indicator is used to define if a Stock or commodity trading price is following a trend or sideways and to measure the trend's strength. If the Stock or commodity trading price is going up, the end for this period will be closer, and on the contrary. The Aroon indicator shows in percents how much time passed between the up (highest) and down (lowest) close starting from the beginning of a period
- 3. • Aroon Up crosses Aroon Down upwards — bullish signal. • Aroon Down crosses Aroon Up downwards — bearish signal. • Aroon Up and Aroon Down move in parallel lines — consolidation period. • The Aroon indicator scale ranges from 0 to 100 • There are 4 important levels to monitor when trading with Aroon indicator: 0, 30, 70 and 100.
- 5. How to trade with Aroon • Aroon Up rules: – When AroonUp reaches the 100 level the uptrend is clearly strong; the closer it remains to the top the stronger the uptrend. – When AroonUp line fluctuates between 70 and 100 levels it suggests a Potential uptrend. The signal becomes stronger if at the same time AroonDown remains between 0 and 30 levels. – When AroonUp line fluctuates between 0 and 30 levels it suggests trend weakness and a possibility of a trend reversal.
- 6. • Aroon Down rules: – When AroonDown reaches the 100 level it suggests downtrend being strong; the closer it remains to the top the stronger the downtrend. – When AroonDown line fluctuates between 70 and 100 levels it advices on a Potential downtrend. The signal becomes stronger if at the same time AroonUp fluctuates between 0 and 30 levels. – When AroonDown fluctuates between 0 and 30 levels it suggests trend weakness and possible future trend reversal.