Calculating Aroon The Aroon indicator can be calculated using the following formula: If we take a look at these formulas, it is apparent that they are both looking at how recent the latest highs and lows were. Welles Wilder that forms the basis for the ADX trend-strength indicator. The final picture shows sensitivity of Equity Curve. Users can even apply another indicator to the Aroon indicators. Book value is calculated. This is the latter half of the look-back period. Market data provided by: Interactive Data Corporation.
The Aroon indicator differs from other price momentum oscillators because it exploits both of these market attributes. This article will examine the logic behind Aroon and show when it works best. The Aroon indicator, popularized by technician Tushar Chande, can be used to determine a likely direction for a particular market on several different time frames.
It can be used in forex, stock or commodity markets. In some respects, they bear many similarities to the directional movement index DMI by J. Welles Wilder that aroon indicator trading strategy the basis for the ADX trend-strength indicator. The two lines of the Aroon indicators form the basis of any trading strategy. Looking at these formulas, it becomes apparent that they compare when the latest highs and lows occurred in recent market action. Higher Aroon values indicate more recent highs and lows, while lower values indicate less recent highs and lows.
A higher number in either indicates a stronger trend and vice versa. There are some very basic rules that traders can use by analyzing the relationship between the Aroon Up and Aroon Down. Buying and selling these extreme readings works best in markets that are range- bound. During these impulsive moves, traders should add to their positions on any counter moves. When the Aroon Up and Aroon Down lines run parallel to each other, it is a sign that the security is in a sideways consolidation period.
This is often the case before a pending breakout. Traders should wait for the price and volume to increase in the security prior to initiating any new positions. When the Aroon Up crosses above the Aroon Down, it is a sign of a potential bullish move. Conversely, a cross of the Aroon Down through the Aroon Up implies a bearish move is underway.
In choppy markets, Aroon line crossovers will generate a number of false signals, so traders should use other indicators to confirm the strength of the cross. Bramesh Bhandari is a proficient stock trader at Indian stock oparty.ru share his insight in Forex,Commodity and World Indices through his site oparty.ru. He also provides online tutoring on technical analysis to oparty.ru can be reached at bhandaribrahmesh oparty.ru.
Futures Modern Trader Magazine. Favorites Alpha Pages Most Popular. Special Topics Alpha Hunters. As a forecasting tool, many traders value time as much as they value price. Trading rules There are some very basic rules that traders can use by analyzing the relationship between the Aroon Up aroon indicator trading strategy Aroon Down. Fed's Lacker leaves U.
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How can I build a trading strategy based on the Aroon indicator? | Investopedia
Video embedded · This article shows a great Aroon Indicator Trading strategy on the S&P 500. This is a long-short strategy that always trades in the direction of the trend.
The Aroon indicator was developed by Tushar Chande, who also created the Chande Momentum Oscillator and the Qstick. When it comes to day trading, strategies based.
May 13, 2014 · What's up guys, I am here to top-off the aroon indicator with a trading strategy that I have had great success with in the past, so if you want a pretty solid trading.