In a simple word, the Aroon indicator tells you, the market is in Uptrend or Downtrend. Also, tell buying or selling signals. For long term trading, this indicator Generally gives good results.
Aroon Indicator setting
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- Period: 14 means,14 bars/candles will take to calculate this indicator.
- Aroon Up: the color of the uptrend indicating line.
- Aroon Down: Color of downtrend indicating line.
Aroon indicator Trading Strategy
This Indicator lines move around 0 to 100.
If Aroon Up Line (Green Line) upper side, this means stock in a positive trend.
If Aroon Down Line (Red Line) is upper side, this means stock in negative Trend.
Buying Signal In Aroon indicator
- When Green Line crosses Red Line and going to the upward direction if Green Line crosses 50 also. then this is the bullish signal. You can buy shares at this point.
- When Red Line comes down from 100. This is the signal that bearish trend strength is decreasing. The bearish trend may end. After crossing Green Line to Red Line if Green Line going upward direction then you can buy.
- When You have bought shares in a bullish signal, If Green Line comes down and touches 50. this is the first confirmation of the bullish trend that may end. and if Green Line Cross Red Line, this is the Second Confirmation you can exit.
Short Selling Signal in Aroon Indicator
- When Red Line crosses Green Line and going in an upward direction if Red Line also crosses 50. then this is the bearish signal. You can Short sell at this point.
- When the green line comes down from 100 lines. This is the signal that bullish trend strength is decreasing. The bullish trend may end. You can sell in this situation.
Conclusion
This indicator is helpful to take a position in the trending market. Generally, it’s helpful for long term trading ( like positional Trading).
Also, This indicator gives false signals also and in the sideways market, this indicator will give lots of false Signals. So if the market is in Trend this indicator will work.
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