Aroon indicator: description, setup and use of the instrument in trading

Aroon indicator is a young instrument in technical analysis. Trader Tushar Chande has developed it in order to obtain the so-called “early” signals. Speculators can determine trends and filter out market noise using this indicator.

Aroon indicator is an accurate, simple, and most importantly, accessible for all users instrument of the IQ Option platform. This oscillator met all the expectations of author and repeatedly helped traders make profitable trading decisions.

Now, thanks to its positive qualities, Aroon is in the list of basic instruments of the IQ Option platform.

Aroon indicator

How to start and configure the oscillator in the trading room?

Trader must perform the following steps to launch Aroon in the terminal IQ Option:

  • to open the indicator menu by clicking on the corresponding icon in the lower left corner of the screen;
  • to select the category of “trend”;
  • to start the instrument.

Launching the Aroon indicator in the trading room

This oscillator settings window will open, where only one base variable is available. It is the calculation period. This parameter is better not to change without preliminary testing. Each trader, as a rule, sets period values in accordance with the requirements of trading strategie.

For example, the default period 14 candles is perfect for intraday trading with timeframes up to 1 hour. And with a period value of 25 candles, the indicator will work more effectively on timeframes of 4 hours or more.

Aroon Oscillator Settings Window

In the settings window, the user can also choose a convenient colour and thickness of the indicator signal lines. By default, the ascending line Aroon Up is red, and the descending line Aroon Down is blue.

Indicator will start and be placed in a separate area of the screen under the price chart of the trading terminal after the user accepts the settings.

Aroon indicator in the trading room IQ Option

What is the logic of Aroon?

Operating principle of the indicator can be defined intuitively. If the ascending line aspires to the mark of 100 on the scale, and the descending line moving to zero, then the bull trend is gaining strength in the market. Conversely, if Aroon Down moves up, and Aroon Up down, then the bearish trend is already developing.

Aroon Indicator Logic

How to trade with the instrument?

To start trading with the Aroon indicator, the user needs to learn how to recognize the signals of the instrument. This oscillator generates three main types of trading signals:

  1. The intersection the mark 50% on scale of indicator. During the intersection of the signal lines with center line of indicator generate trading signals for opening and closing deals.
    If AroonUp, at the top of the scale, intersections the 50% mark, then the upward trend in effect has weakened and may soon change. The user needs to close long positions and get ready for asset sales.
    And if AroonDown intersections the level of 50% from top to bottom, then the opposite situation has now formed on the market, namely: the downward trend has weakened and the user must get ready for active buying.

Signal: the intersection of 50% mark of indicator and signal lines

  1. Distance between the instrument lines. If the indicator lines move in parallel at the maximum distance from each other, then the current trend increases in the market. And the trader must actively trade.
    If AroonUp and AroonDown pass close to each other, then the market is in flat. In this case, the trader is better to refrain from trading or use other technical analysis instruments.

Signal: distance between the oscillator lines

  1. The intersection of the lines of the indicator. This signal informs the trader about the formation of a new long-term trend in the market. And, depending on which line rushed up the scale, the trader should open trading positions: if AroonUp, then the long position; and if AroonDown, then short position.

Signal: the intersection of Aroon lines

Summary

Aroon indicator rarely gives false information, timely generates signals to enter the market and close positions. Only with sharp fluctuations in price this indicator may generate signals with a delay. But in other situations Aroon effectively serves traders

However, in trade, one should not forget about risks, since not a single trader is insured against them. Carefully study the new instrument and comply with risk management.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.

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