Aroon Indicator
Aroon is a perfect indicator for measuring the trend momentum and strength. Free download. An excellent tool for trading the trend and detecting price reversal
Description
Aroon is a relatively less known indicator. However, this does not mean it is less powerful. It is as good as other indicators, if not better. Tushar Chande developed the indicator in 1995.
Essentially, the Aroon indicator for MT4-free download was designed to identify the type of trend in the market (uptrend, downward or sideways movement). It also measures the strength of the trend and informs traders of potential price reversal. Moreover, it helps traders identify consolidation and corrective retracement in the market.
How Works Aroon Indicator
The indicator consists of the Aroon up and Aroon down. The Aroon up measures the uptrend value while the Aroon down measures the downtrend in the market. The two lines help traders determine the price movement and anticipate selling and buying pressure in the market by measuring the value of the uptrend and downtrend in the market.
The indicator depicts an oscillator in the price charts with values 0 to 100, with the two curves oscillating between the values. For instance, if the Aroon up is above the Aroon down, that signals an uptrend. Likewise, when the Aroon crosses the 50 value market, that is a tell-tale sign of a strong uptrend. This scenario is validated by the Aroon down perched below the 30.
Similarly, when the Aroon down is above the 50 value, the downtrend is strong. This signal is further strengthened by the up Aroon line near the zero mark. However, when both Aroon lines are in close proximity, that is a telltale sign that the market is consolidating.
When a line is near the 100 level, the trend is well established and strong. However, when it crosses 30 markets towards zero, the trend is becoming weekend, possibly heading to a reversal.
Chart Example
The chart above shows price movement for the Euro against the New Zealand Dollar. Notice how the Aroon down blue line perches around the 100-mark, as shown by the red circled area. The Yellow Aroon up line stays around the 0 value area. The fact that the blue line is around 100 means the downtrend is strong. The price action confirms the indicator signal is true. The price maintains a steady downtrend, as shown by the red arrow.
Similarly, during a strong uptrend, the Aroon up yellow line remains around the 100 value while the blue line oscillates around the 0-mark, as shown by the green circled area. In fact, the price establishes a steady uptrend in line with the indicators signal.
Conclusion
It is a perfect indicator for riding the trend. It can also help you measure the trend momentum and predict impending price reversal. Do not just take our word for it. Go ahead and try it out.