What is the Aroon indicator?

The Aroon indicator is a technical indicator that was developed by Tushar Chande in 1995. It is used to measure the strength of a trend and to identify potential reversals.

How does the Aroon indicator work?

The Aroon indicator is composed of two lines: Aroon Up and Aroon Down. Aroon Up measures the number of periods since the last uptrend high, while Aroon Down measures the number of periods since the last downtrend low.

The Aroon indicator is a momentum indicator, which means that it measures the speed of the trend. The higher the Aroon Up or Aroon Down reading, the stronger the trend.

The Aroon indicator can be used to identify potential reversals by looking for divergences between the two lines. A divergence occurs when the Aroon Up and Aroon Down lines are moving in opposite directions. This can be a sign that the trend is weakening and that a reversal may be coming.

How to use the Aroon indicator?

The Aroon indicator can be used in a variety of ways, but here are a few basic strategies:

• Buy when Aroon Up crosses above Aroon Down. This indicates that the trend is turning bullish.

• Sell when Aroon Down crosses above Aroon Up. This indicates that the trend is turning bearish.

• Enter a trade when Aroon Up or Aroon Down reaches 70. This indicates that the trend is very strong.

• Exit a trade when Aroon Up or Aroon Down reaches 30. This indicates that the trend is weakening.

Advantages and disadvantages of the Aroon indicator

The Aroon indicator is a simple and easy-to-use indicator that can be used to identify potential reversals. It is also relatively versatile and can be used in a variety of trading strategies.

However, the Aroon indicator is not without its disadvantages. One of the biggest disadvantages is that it can be lagging. This means that it can take some time for the indicator to signal a reversal.

Another disadvantage of the Aroon indicator is that it can be noisy. This means that it can generate a lot of false signals.

Overall, the Aroon indicator is a useful tool for traders who are looking to identify potential reversals. However, it is important to be aware of the limitations of the indicator and to use it in conjunction with other indicators.