Download indicator: Aroon_Up_Down.mq4
Aroon Quick Summary
Trading with Aroon indicator involves the following signals:
The idea behind Aroon indicator
Aroon indicator is a young one, developed by Tushar Chande in 1995.
How to interpret Aroon indicator
There are two parts to the Aroon Indicator – two coloured lines: Aroon up (red line) and Aroon down (blue line).
There are 4 important levels to monitor when trading with Aroon indicator: 0, 30, 70 and 100.
The default time period for Aroon indicator is 25, on some panels - 14. But, it can be changed to, for example, 10-periods for shorter term trades or to 50-periods for longer ones.
Aroon Forex chart example
How to trade using Aroon indicator?
1. When AroonUp crosses AroonDown upwards it is a bullish signal.
1. When AroonUp reaches the 100 level the uptrend is clearly strong; the closer it remains to the top the stronger the uptrend.
Opposite true for AroonDown:
1. When AroonDown reaches the 100 level it suggests downtrend being strong; the closer it remains to the top the stronger the downtrend.
Aroon(up) = ((total number of periods — number of periods since highest close) / total number of periods) x 100
Aroon(down) = ((total number of periods — number of periods since lowest close) / total number of periods)) x 100
Aroon indicator shows how much time passed between the highest (up) or lowest (down) close since the beginning of a period (in percents).
As market changes, traders adjust their trading approaches and methods from trend following to tools used during market consolidations. Aroon indicator helps traders to determine when to use a trend following indicators and tools and where to switch to oscillator like tools that work best in consolidating markets.