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price consolidation

Whereas an Aroon-down value sustained at 100 may be interpreted as oversold conditions in the market; so, a rally should be expected afterward. The Aroon indicator’s formula might seem complex, but it does result in a chart that helps us to see how trends are growing and developing. This makes it a useful tool for traders who can use an Aroon indicator strategy for trading. Aroon is a common technical analysis indicator used to pinpoint the start of a trend and indirectly measure the trend’s overall strength and fatigue. The Aroon signals are basic and uncomplicated, making it an excellent indication for novices.

These products may not be suitable for everyone and you should ensure that you understand the risks involved. Speculate only with funds that you can afford to lose. Place a stop-loss order at 30 “pips” above your entry point, based on the ATR reading. As with other indicators, Aroon is best used in combination with other indicators like the RSI and the commodities channel index. The final stage is when Aroon-Up rises and reaches 100 while Aroon is at low levels.

The Aroon Indicator is bounded, fluctuating between values of 0 and 100. If both lines are above 50, this means that a high/low was seen in the last 12 periods. A reading of below 50 reveals a high/low within the other 13 periods. Developed by Tushar Chande in 1995, the Aroon Indicator is a trend-based indicator used to identify changes in the price of stocks.

In other words, the bullish crossover occurred with expanding volume. Aroon Oscillator can be considered an extension of the Aroon Indicator and measure how strong or weak the trend is. The Aroon Oscillator, in other words, confirms whether the trends that can be seen building up in the Aroon Lines should be used to interpret if there is a valid trend. The Oscillator is the difference between Aroon Up and Aroon Down, and the range is from 0%-100%. When it is close to 100%, a trader can be confident in the signals coming from the Aroon Lines.

Aroon down

You should consider whether you can afford to take the high of losing your money. Similarly, oscillators can be profitable indicators during range-bound markets, but might perform very poorly during strong trending markets. The Aroon indicator can help indicate which mode the market is in. The Aroon indicator system is a unique member of the oscillating family of technical tools. Its presentation is based on the locations of two separate lines when most indicators generate alerts from a single indicator curve.

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When the oscillator moves up, you will know that the price is at a new high. The Aroon Indicator alone can’t give the most accurate trend prediction in the market. With that said, using additional tools is advisable to help you with your predictions. Long positions when the green line or Aroon up line starts moving up from the zero lines and the red line or the Aroon Down line starts falling from the 100 mark. You can also change the colours of the Aroon Up and Aroon Down lines. The default colours are green and red, but you can alter them depending on your preference.

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Putting that information together into something actionable is going to depend on the trader. Another feature of the indicator is the ability to give you, at a glance, the general direction of price. There have been 4 Bitcoin Buy Zones since it’s inception.

indicator was developed

However, the indicator is prone to fake-outs during volatile, range-bound action as seen on many momentum-based indicators. You must check for further confirmation from volume and price rather than on the indicator alone. Track the number of recent highs and lows for the prior 25 periods of security. The logic behind this is that a strong uptrend will usually create new highs while a strong downtrend will create new lows.

The flag variable helps keep track of signal changes e.g. bullish and bearish signals will not show unless a crossover occurs. Inputs include a ticker symbol , a start date and end date . We then assign data to the get_data() method which we imported previously. We’ll pre-process the column headers to the desired titles. Then, produce a list of columns assigned to headers to format, rounding the prices to 2 decimal places using the .round() function. The resulting action returns the processed stock prices data_new.

Predictions and analysis

If we’re looking at a new emerging the first sign is when the Aroon-Up crosses above the Aroon-Down. This signals new highs are becoming more frequent recently than new lows. The next sign is when the Aroon-Up moves above 50 and the Aroon-Down moves below 50. The third and final sign is when the Aroon-Up reaches 100, while the Aroon-Down remains at extremely low levels, usually below 30. In some cases, Aroon-Up will cross above 50 first, and will then cross above the Aroon-Down indicator.

The Aroon Oscillator is calculated in the following way. ● If the parameters are correct, it produces high-quality signals. ● It is equally effective while trading numerous instruments and on various trading platforms. 30-50% – the negative trend is wearing thin; Buyers, on the other hand, have yet to take the initiative. Lower than 30% – purchasers are no longer motivated to drive up the price. Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk.


When MACD and Aroon both point in the same direction, you can consider the trend to be strong. Meanwhile, if the Aroon indicator indicates the same price direction, we may consider the trade to be genuine. When the Aroon-Up line crosses the descending Aroon-Down line from the bottom up and gets over the 30% zone, it is a buy signal. A fresh upswing normally begins at this point, providing an excellent entry opportunity for a long position.

When the center line is crossed or the reversal signal, the opposite crossover of the Aroon lines, appears, the profit is taken. Using the Aroon indicator in combination with other tools of the trade could make for a formidable forex trading strategy. There are no shortcuts to gaining experience, but to succeed in the forex market, interpretation skills are primary to finding good trading setups. Veterans swear by their demo sessions, and as you practice with the Aroon indicator strategy, you will learn quickly. The CRB index chart below shows signals from the Aroon system (and 63-Day exponential moving average) on the price chart — and Directional Movement (25-Day) below. The shorter-period 14-Day Directional Movement System was discarded as it gave too many false signals.

  • The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows.
  • The main difference is that the Aroon indicator formulations are concerned with the time passed between highs and lows.
  • When evaluating online brokers, always consult the broker’s website.
  • However, the Aroon Indicator was first created, and then the Aroon Oscillator followed with a much-improved system to detect strength in trends.

This indicates the possibility of a quick change of movement to the opposite. You also need to monitor when the indicator breaks through the zero axis. The Aroon Oscillator line can be included with or without the Aroon Up and Aroon Down when viewing a chart.

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The consists of the “Aroon up” line, which measures the strength of the uptrend, and the “Aroon down” line, which measures the strength of the downtrend. The Relative Strength Index is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions. The highs and lows used in the Aroon Up and Aroon Down calculations help to create an inverse relationship between the two indicators. When the Aroon Up value increases, the Aroon Down value will typically see a decrease and vice versa.

The Mcginley Dynamic indicator is an indicator that is based on moving average line indicator with a soothing… When it is more than 50, a low was seen within the 12.5 periods. A down reading close to 100 signifies a low was recently seen. It measures how long it has been since prices have reached a new low within the particular time. If the current low of the bar is the lowest within the user defined number of times before it, then the Aroon down value is 100.


The indicator uses divergence and crossovers to generate trade signals. The indicator is best used in conjunction with price action analysis fundamentals of long-term trading, and other technical indicators. Cory Mitchell, CMT is the founder of He has been a professional day and swing trader since 2005. Cory is an expert on stock, forex and futures price action trading strategies.

This computational work shows that strong trends occur when the respective curve hovers near the “100” mark while the opposing curve falls to near zero. When the curves intersect, it is interpreted as a “Buy” or “Sell” signal, depending on which curve takes the lead. If the “Up” or Greenline is rising, then a shift to an uptrend is in progress. When the “Down” or Redline rises toward the 100 level, it is time to consider shorting your chosen asset. The latter situation is illustrated in the overview chart, i.e., a strong downward trend formed in the first half of the chart.

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Find out the details about this technical indicator as well as strategies for using it on stock, Forex, and other markets. Oscillators define the overbought and oversold states of the market, the trend strength. Trend-following indicators identify the direction of the ongoing trend in a particular security, its strength, and potential pivot points. There is a trading strategy based on the Aroon and Stochastic used in conjunction. Aroon defines the global trend, and the Stochastic is used to determine a profitable entry point.

A typical example of an info indicator is a widget with the relevant spread size. Volume indicators indirectly measure the trade volumes, providing information on the activity of buyers and sellers. Aroon is a trend-following indicator and oscillator that defines the trend direction and strength. The green point marks the moment when the Aroon-Up goes beyond the median and crosses the Aroon-Down from the bottom up.

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