Aroon indicator
Description
Today, the Internet actively acts not only as a means of communication and information retrieval, but also as a real source of income. The word “freelancing” has become common for us, acting as an image of a successful businessman who works when it is convenient and where it is convenient, and at the same time earns decent money. Free life attracts many, we begin to master new professions, try something new.
Being a full-fledged freelancer, trading has become especially widespread on the network. Binary options allow you to work for a minimum amount of time with the maximum possible earnings. This is the only completely legal type of work that will bring income in just 30 seconds.
Having achieved the first success, traders try to reach a stable income from options, constantly studying profitable strategies, testing and actively applying new indicators, tracking the current picture of broker ratings. All this and even more useful awaits you on our website. Today we will talk about an interesting indicator Aroon.
The Aroon indicator is a very useful tool widely used for technical analysis, allowing you to determine price highs and lows on the chart in time and accurately, and earn good money on it. It was developed by trader Tushar Chand, who is also the author of the popular StochRSI.
Interestingly, the very name “Aroon” from Sanskrit means “early light of dawn”. This demonstrates one of the advantages of the tool – in the early delivery of the signal. Its peculiarity lies in the fact that Aroon gives clear high-quality signals for entering a trade, it is easy and simple for a trader with any experience to work with it.
One of the significant problems of any trader is how to correctly determine the reversal points and trend directions. This is what should be the key to successful work on the exchange. Aroon is an indicator that allows you to easily identify trends, effectively show extremes and give fairly accurate signals for trading.
An accurate understanding of the strength of the current trend, both upward and downward, gives a great advantage to market participants, allowing them to make more accurate forecasts and win on it. In addition, the tool allows you to determine the phase of the market (for example, a flat state), helping to act in accordance with it and not to trade when it will not make a profit.
You can see in more detail the principle of operation of the Aroon indicator on the price chart of the MetaTrader 4 terminal in the image below. You can also quickly download the MetaTrader 4 platform and study the tool in more detail.
What is the working principle of the Aroon indicator?
Aroon allows you to accurately determine market trends, knowing which, a trader can easily open reliable trades in the direction and get a good income. At the same time, even the smallest price fluctuations, as well as the strengthening/weakening of the trend for a specific period, will not escape the instrument. Aroon qualitatively displays the main states of the exchange: upward and downward trends, its downward movement, trend reversals, its gap (gaps) and stages of consolidation (flat).
The indicator consists of 2 lines, the location of which indicates the strength of the current trend. You can even say that this is a whole system of indicators aimed at accurately determining the phase of the market.
As part of the tool:
- Upper Aroon (Aroon up, green line) is an indicator of the number of days from the beginning of a particular period to its maximum.
- Lower Aroon (Aroon down, red line) is an indicator of the lows of the period.
How to work with the tool:
- If the upper and lower lines of the indicator move along the same line, trades take place, there is no trend,
- if the upper (or lower) lines of the instrument fall below the 50 mark, we have an upward (or downward) trend in front of us, losing its strength,
- If the upper (or lower) lines of the instrument are above the 70 mark, we have an upward (or downward) trend, quite strong.
Being an unusual, but quite accurate system of indicators, Aroon is able to take trading to a new level.
Formulas for calculating indicator lines:
AroonUp = ((number of periods – number of periods from maximum) / number of periods) * 100%
AroonDown = ((number of periods – number of periods from minimum) / number of periods) * 100%
Info taken from freshforex.org website
Indicator signals
Overbought-oversold signals:
The extreme values of the indicator lines are at 100 and 0.
- If the Aroon down, the red line, has reached the 100 mark, this is a downward (bearish) trend, a rebound is possible, it is worth buying call options,
- If the Aroon up, the green line, has reached the 100 mark, this is an upward (bullish) trend, probably a reverse price movement, it is worth buying put options.
Line crossing signals:
- If the green line (Aroon Up) is above the 70 mark, and the red line (Aroon Down) is below the 30 mark, this indicates an upward trend in the market, it is worth buying call options,
If both lines move along the centerline at the 50 mark, there is consolidation in the market. Values above 75 indicate a strong uptrend.
- If the Aroon Down line (red line) is above the 70 mark, and the green Aroon Up line is below the 30 mark, this indicates a downtrend in the market, it is worth buying put options.
The 70 and 30 marks will be consolidation levels.
Signals of parallel movement of lines
This is one of the main signals of Aroon. With such signals, it is important to wait until the indicator lines have passed at least half the distance of the chart and then only open a trade:
- If the Aroon Down (red line) is located above, buy PUT options,
- If the green line (Aroon Up) is located above, we buy CALL options.
It is recommended to trade medium-term options here, which will make the work reliable and productive.
Do I need to install the Aroon indicator in your platform?
Aroon is a non-standard indicator for trading on the stock exchange, it was not included in the list of basic tools of MetaTrader 4. Download it for free from our website here. Next, you need to install the file in the MT4 platform, to do this, read the simple instructions here.
After installation, add Aroon to the price chart, for this:
- Click the “Insert” tab in the top menu of the platform
- Select the tab “Custom” – “Aroon”.
The peculiarity of the tool is determined by the period settings. By default, the default period is 14, by increasing this indicator, you will get a smoother chart, decreasing, on the contrary, you will make it the most sensitive to trend changes.
Additionally, you can configure the sound accompaniment of signals by setting Soundalert to True. Alerts about signals can be sent to the mail, for this you need to set the Mailalert parameter to True.
Application of the indicator for binary options
As one of the quality trending tools, Aroon is easy to work with, allowing even a binary options beginner to easily identify the phases of the market. These are two lines located in a separate chart in the MT4 terminal. The intersection of the lines will clearly demonstrate the trend. Its significant advantage, in addition to easy use and reading of signals, is a simple and convenient setup.
Aroon works great for intraday trading, surprising even professional traders with simple work. And yet, it is worth remembering the presence of false signals that give out all the tools of technical analysis. It is recommended to combine it with other tools to confirm a quality signal (for example, Exponential Moving Average, Zigzag Indicator, Fractal Volumes, etc.).
Among the advantages of the indicator:
- Reliability, it gives a minimum of false signals,
- Accuracy, it determines not only the direction / strength of the trend, but also assesses the possibilities of reversals as accurately as possible,
- Stability and simple settings,
- Easy interpretation of indicator data.
Rules for concluding transactions (screenshots)
Trading with an overbought-oversold signal
If the Aroon down line has reached 100, this is a downward (bearish) trend, a rebound and a trend change are possible, it is worth buying call options. The image shows a downtrend (which changes its direction to the opposite trend) in the MT4 terminal:
Take advantage of the trend and place a CALL bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: up
- Next, click the “buy” button and wait for the results of the forecast:
If the Aroon Up line has reached the 100 mark, this is an upward (bullish) trend, probably a reverse price movement and a trend change, it is worth buying put options. The image shows an uptrend (which changes its direction to the opposite trend) in the MT4 terminal:
Take advantage of the trend and place a PCI bet with the Binomo broker by going to the binomo.com website and preparing an option, indicating:
- Type of option
- Expiration date
- Amount
- Prediction: down
- Next, click the “buy” button and wait for the results of the forecast:
Trading at a signal of crossing the lines
If the green line (Aroon Up) is above the 70 mark, and the red line (Aroon Down) is below the 30 mark, this indicates an upward trend in the market, it is worth buying call options. In the image, you can see the uptrend in the MT4 terminal (taking advantage of the trend, place a CALL bet on the binomo.com website, the instructions are listed above):
If the Aroon Down line (red line) is above the 70 mark, and the green Aroon Up line is below the 30 mark, this indicates a downtrend in the market, it is worth buying put options. In the image, you can see the downtrend in the MT4 terminal (taking advantage of the trend, place a PCI bet on the binomo.com website, the instructions are listed above):
Trading with a signal of parallel movement of lines
If the Aroon Down (red line) is located above, we buy PUT options. In the image, you can see the downtrend in the MT4 terminal (taking advantage of the trend, place a PCI bet on the binomo.com website, the instructions are listed above):
If the green line (Aroon Up) is located above, we buy CALL options. In the image, you can see the uptrend in the MT4 terminal (taking advantage of the trend, place a CALL bet on the binomo.com website, the instructions are listed above):
Money management
Significantly determining the results of work on the stock exchange, the rules of money management should be studied by the trader in the first place. Having built effective work with it, it is much easier and faster to increase your income. If market participants need a stable good income, it is also important for them to understand the rules of money management:
Minimum capital: when trading on the stock exchange, it is recommended to put the minimum amount of funds on the bet; the value of the option must be no more than 5% of the account; It is worth buying inexpensive options, the purchase of which will not affect the state of the deposit. By applying these rules to trading, you will save the state of capital well.
Minimum deposit: when trading on the stock exchange, it is recommended to take part in trades that will save the deposit; when purchasing an asset, do not transfer the entire deposit to it; It is necessary to maintain its positive state as much as possible, because. This capital will still come in handy. By applying these rules for trading, you will keep your deposit for a long time.
Minimum options: when trading on the stock exchange, it is recommended to buy a minimum of options, for example, 2-3 assets; This applies more to new players on the exchange; When you become more experienced, feel free to increase the number of different deals. By applying these rules to trading, you will work on the exchange most efficiently.
Minimum of emotions: when trading on the stock exchange, it is recommended to start tuning in to serious work, since in order to make the right decisions, you will need analytics and balanced clear decisions; Remember that in the market it is not enough to use only experience, your emotions are what makes work productive. By applying these rules to trading, you will achieve the necessary heights in trading.
Expiration
Expiration is the moment when the trading of a particular asset ends, and the participants of these trades find out the results of their forecasts regarding the dynamics of the market. It is also a basic concept of working on the stock exchange, which, like the basics of money management, can make trading much more profitable.
Types of options:
- Ultra-short options – 30 seconds – 5 minutes.
- Short-term options – 10 minutes – several hours.
- Medium-term options – a day – a few weeks.
- Long-term options – a month – six months.
Is it allowed to extend the expiration?
Not allowed by all platforms. This is a very convenient feature that allows you to extend the expiration and reduce your losses by increasing income during trading, if an incorrect forecast is indicated.
Expiration rules:
- Beginners in the financial market are advised to initially trade long-term transactions that are stable and have minimal risk of loss.
- Financial market professionals are advised to trade with expiration, which will make the work not only the most comfortable, but also productive.
- Financial market players who currently need instant capital from trading are advised to trade short-term options that will generate income in at least 30 seconds.
- Financial market players who currently need a stable income from trading are advised to trade long-term options that will bring a decent income.
Expiration in strategies with Aroon
Expiration at an overbought-oversold signal:
Short-term trading: allowed; when trading with the Aroon indicator, which perfectly shows trend signals, with such an expiration, you should always remember about its risks; You need to combine the tool with other indicators.
Medium-term expiration: allowed; To make trend trading with Aroon more productive, you need to combine it with additional indicators to eliminate false signals and see profitable ones.
Long-term expiration: allowed; Aroon allows you to conduct long-term trading due to a good reflection of the presence of a trend, as well as its strength; it is still worth combining it with additional tools; When working with such an expiration, take advantage of fundamental analytics that will bring significant profits.
Expiration at the signal of crossing the lines:
Short-term trading: allowed; When working with this indicator, which perfectly shows trend signals, with such an expiration, you should always remember about its risks; You need to combine the tool with other indicators.
Medium-term expiration: allowed; To make such trading more productive, you need to combine it with additional indicators to exclude false signals.
Long-term expiration: allowed; Aroon allows you to conduct long-term trading thanks to good trend display signals, as well as its strength; it is worth combining it with additional tools; When working with such an expiration, take advantage of fundamental analytics that will bring significant profits.
Expiration when there is a signal of parallel movement of lines
Short-term trading: allowed; When working with this indicator with such a turbo expiration, it is important to always remember its risks; You need to combine the tool with other indicators.
Medium-term expiration: recommended; is considered in this case the most reliable and productive; you can easily track the trend and have time to make a profitable bet; You also need to combine it with additional indicators to exclude false signals.
Long-term expiration: not recommended; In this case, it is difficult to understand when this signal will occur again over a long period of time; Such trade would be unproductive.
When learning the basics of trading, do not forget to pay attention to expiration, which will help you achieve the desired result. To do this, get acquainted with one of the simplest and most convenient terminals of the Binomo broker, offering a choice of expiration from 30 seconds to 1 day. Right now, get acquainted with the website of the broker binomo.com and become much more successful.
Downloads
MetaTrader 4 (MT4) platform – download.
Aroon indicator for the MT4 platform – download.
Tagged with: Binary Options Indicator
