Aroon Indicator Guideline

Aroon MT4 indicator is a custom indicator that belongs to the oscillators’ category. It was developed in 1995 by Tushar Chande, CEO of the “Tuscarora Capital Management” company,  and the author of the books “Belong Technical Analysis: how to develop and implement a winning trading system” and ” The New Technical Trader: boost your profit by plugging into the latest indicators”. Moreover, the MT5 Aroon indicator estimates the interval of time between the ongoing highs and lows. In Sanskrit, the word “Aroon” means “dawn’s light”. Chande used this name because the indicator was invented to indicate the beginning of a new direction. In this course, we will discuss the Aroon indicator for Tradingview and MetaTrader platforms, explain how to use and trade with it in the Forex market, and how to calculate it.

Aroon Indicator

What is aroon indicator ?

Aroon, also known as Aroon up and down is a direction following strategy. It is employed to determine the strength and the direction of a market. Moreover, it doesn’t base on price movements but on the number of periods since the price registered high or low on n days. This is because Aroon based on the concept that the upward direction market will produce new highs and downward direction markets will produce new lows. In fact, this oscillator is a set of two indicators. Arron-up, which calculates the number of days since the recent 25-day high. And Arron-down, which calculates the number of days since the recent 25-day low. This why considered a unique indicator, as it concentrates on time relative to price.

How Aroon indicator work?

Aroon MT4 indicator displays in a separate window below the chart. It shows two lines that oscillate higher and lower between 0 and 100. These lines correspond to Aroon-up and Aroon-down, which are drawn side by side to facilitate the interpretation. However, as these lines move you can start noticing the strength of a direction, likely reversal, or market ranging.

How to trade with Aroon indicator ?

To trade with the Aroon MT5 indicator you need to keep an eye on the two lines placed at the bottom of the chart. According to the movement of these lines, Forex traders can make decisions. When the Aroon up passes above the Aroon down, then it is a signal of an uptrend. Conversely, when the Aroon down passes above the Aroon up this is a signal of a downward direction. If the indicator moves higher than 70, it indicates a strong movement. While moves lower than 30 indicate a weak movement. Moreover, movements between 30 and 70 are a signal that the market is unstable. For instance, if Aroon-up is higher than 70, while the Aroon-down is lower than 30, then the direction is certainly upward.

Crossover between the Aroon up and down indicators gives confirmations. For instance, if the Aroon-up is between 70 and 100 crosses the Aroon-down which is between 0 and 30, then an upward direction is confirmed. On the other hand, if the bearish indicator (Aroon-down) is between 70 and 100, and the bullish indicator (Aroon-up) is between 0 and 30, then a downward direction is confirmed. 

When Aroon-up and Aroon-down move with each other in parallel at almost the same level, this is a signal that there is ranging trade or consolidation.

Aroon indicator formula

Calculating the Aroon MT4 indicator is not complicated. Moreover, it is not necessarily to make this calculation as the indicator is calculating automatically on charting platforms. but you need to understand it because that will help you to trade easily with the Aroon indicator. Thus, Simply you need to follow these steps:

  1. Choose the lookback period. You can use the default setting which is 14 days, or 25 days as recommended by Tushar chande.
  2. Follow the highs and lows of the security price for the past n periods.
  3. Record the time elapsed since the last highs and lows.
  4. Apply these numbers in the computations of the Aroon-up and Aroon-down:

Aroon-up= [ ( n – number of periods since highest high ) / n ] * 100

Aroon-down= [ ( n – number of periods since lowest low ) / n ] * 100

*n: the number of periods.

Advantages and disadvantages

Aroon Tradingview indicator like any indicator has strengths and weaknesses, which are mentioned below:

Advantages:

  • Simple and easy to understand: Forex traders can interpret and calculate the Aroon lines easily.
  • Flexible in choosing the time period: Forex traders can change the time period for calculating the Aroon lines in terms of how frequently they trade.
  • Signals the change in directions effectively.

Disadvantages:

  • It is a lagging indicator as it is based on historical data.
  • Impacted more by time than price movements. This is why it does not provide any information about the volume of change that can happen.
  • Should combine it with other indicators, because alone does not always provide accurate signals.

Download Aroon indicator for MT4

Aroon indicator is very helpful MT4 toom for identifying potential market reversals and finding if the market is trending or ranging. This MT4 tool sets an oscillator below the main chart, as you can see in the picture below, which contains two lines that move high and low. An up line which is in blue corresponds to Aroon-up, and a down line which is in red corresponds to Aroon-down. you can change these default colors to your preference in your MetaTrader 4 platform.

Aroon indicator MT4

Download Aroon indicator for MT5

Aroon MT5 indicator is a custom indicator, used by Forex traders to determine the direction of a tendency and how strong it is. Moreover, this MT5 indicator allows them to identify the beginning of a new direction or the end of a current direction. It is a free download indicator that you can add to your MetaTrader 5 platform easily. Also, MT5 Aroon indicator allows you to identify consolidation in the market and offers you buy and sell signals.

Aroon indicator MT5

Download Aroon indicator for Tradingview

Aroon Tradingview indicator is a very effective technical indicator as it enables you to catch any direction change from the beginning. However, this Tradingview indicator displays two lines in which Forex traders can make decisions accordingly. if the Aroon-up crosses above the Aroon-down, this is an upward direction signal and the inverse is true.

Aroon indicator Tradingview

Conclusion

Aroon indicator for MetaTrader and Tradingview platforms is very simple and easy to use. It enables Forex traders not only to identify the direction and the strength of a movement, but also shows the period of consolidation and potential reversal. Otherwise, this technical tool sometimes gives false signals, which is why is recommended to use in combination with another indicator.