Developed by Tushar Chande in 1995 author of "The New Technical Trader" and "Beyond Technical Analysis"
Why should I use it?
Trading in the direction of the trend is the most basic principle of technical analysis, but before you can trade in the direction of the trend, you first need to make sure you know what the current trend is! The Aroon indicator can actually tell you if the market is currently trading in an up trend, a down trend or rather no trend at all.
Not only does the Aroon tells us if we are in a trend or not, but it can also tell us how strong or weak that trend is at any given time, therefore supplying you, the trader, with a clear view of the market's direction.
What does it look like?
The Aroon indicator is built out of two lines which are called: Aroon up (blue line), and Aroon down (red line). The lines can get any value between 0 and 100. In addition, notice the key levels of 30, 50 and 70.
How does it work?
The Aroon will tell us if the market is in a trend, and if so, how strong or weak that trend actually is. All you need to do is simply observe the Aroon lines:.
Spotting an uptrend (bullish trend):
We know that the market is trading in an uptrend if the Aroon up line (blue) is above the level 70 and at the same time the Aroon down line (red) is under 50.
The market is trading in a strong up trend when the Aroon up line is above the level 70 and at the same time the Aroon down line is under 30.
Spotting a downtrend (bearish trend):
We know that the market is trading in a down trend when the Aroon down line is trading above the level 70, and at the same time the Aroon up line (blue line) is trading under 50.
The market is trading in a strong down trend when the Aroon down line is trading above the level 70, and at the same time the Aroon up line (blue line) is trading under 30.
We know that the market is not trending (but rather ranging {hyperlink :range}) if both the Aroon up and the Aroon down lines are under 70.
Example
Below is a EUR/USD chart with the Aroon indicator. At first the market is controlled by a strong uptrend, the Aroon up (blue) is trading well above 70, and the Aroon down (red) is under 30.
Then around 17:25 the market is changing its direction, and a down move is formed. The Aroon indicates this as the Aroon down line is now moving above 80 and the Aroon up is moving under 30.
Why should I use it?
Trading in the direction of the trend is the most basic principle of technical analysis, but before you can trade in the direction of the trend, you first need to make sure you know what the current trend is! The Aroon indicator can actually tell you if the market is currently trading in an up trend, a down trend or rather no trend at all.
Not only does the Aroon tells us if we are in a trend or not, but it can also tell us how strong or weak that trend is at any given time, therefore supplying you, the trader, with a clear view of the market's direction.
What does it look like?
The Aroon indicator is built out of two lines which are called: Aroon up (blue line), and Aroon down (red line). The lines can get any value between 0 and 100. In addition, notice the key levels of 30, 50 and 70.
How does it work?
The Aroon will tell us if the market is in a trend, and if so, how strong or weak that trend actually is. All you need to do is simply observe the Aroon lines:.
Spotting an uptrend (bullish trend):
We know that the market is trading in an uptrend if the Aroon up line (blue) is above the level 70 and at the same time the Aroon down line (red) is under 50.
The market is trading in a strong up trend when the Aroon up line is above the level 70 and at the same time the Aroon down line is under 30.
Spotting a downtrend (bearish trend):
We know that the market is trading in a down trend when the Aroon down line is trading above the level 70, and at the same time the Aroon up line (blue line) is trading under 50.
The market is trading in a strong down trend when the Aroon down line is trading above the level 70, and at the same time the Aroon up line (blue line) is trading under 30.
We know that the market is not trending (but rather ranging {hyperlink :range}) if both the Aroon up and the Aroon down lines are under 70.
Example
Below is a EUR/USD chart with the Aroon indicator. At first the market is controlled by a strong uptrend, the Aroon up (blue) is trading well above 70, and the Aroon down (red) is under 30.
Then around 17:25 the market is changing its direction, and a down move is formed. The Aroon indicates this as the Aroon down line is now moving above 80 and the Aroon up is moving under 30.
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