Forex Aroon Indciator

What is Aroon Indicator?

Aroon indicator is a technical analysis indicator used by many forex traders to find

• Whether the price is trending
• Whether the price is moving sideways
• The strength of the trend, if the price is trending

Aroon indicator mainly consists of two lines.

• Aroon Up Line
• Aroon Down Line

This indicator ranges between 0 and 100 like a stochastic oscillator.

Aroon indicator is used to find the changes in the trend and whether the trend will continue or not.

The following picture shows you the Aroon indicator. The blue line represents the Aroon Up line and the red line represents the Aroon Down line.

Aroon Indicator Formula:

Since Aroon indicator is made up of two lines, Aroon Up and Aroon Down, each line has its own formula.

Aroon Up Formula:

(No. of Periods – No. of Periods since the Highest High during that time)

—————————————————————————————————— X 100

No. of Periods

Aroon Down Formula:

(No. of Periods – No. of Periods since the Lowest Low during that time)

———————————- ——————————————————————- X 100

No. of Periods

For calculating the Aroon Up and Aroon Down Lines, a specific number of periods is used. The default is 14 periods.

Trading Arron Indicator:

Aroon indicator is used to find the trend in the following ways. Normally levels of 30, 50 and 70 are used by many traders for this.

• If the Aroon Up line is above the 70 line, it indicates a strong uptrend.
• If the Aroon Down line is above the 70 line, it indicates a strong downtrend.
• If the Aroon Up and Down lines move parallel to each other, it indicates that the price is consolidating.
• If the Aroon Up is below the 50 line, it indicates that the uptrend is weakening.
• If the Aroon Down is below the 50 line, it indicates that the downtrend is weakening.
• If the Aroon Up crosses the Aroon Down line upwards, it signals that an uptrend is forming. (You may need other indicators to confirm this.)
• If the Aroon Down crosses the Aroon Up line upwards, it signals that a downtrend is forming. (You may need other indicators to confirm this.)

Aroon Up line above 70 line:

When the Aroon Up line is above the 70 line, it indicates a strong up trend. Check the following picture. This is a AUDCAD hourly chart and you can see that the Aroon Up line, which is the blue line, is above the 70 line and there is a strong uptrend.

Aroon Down Line Above the 70 Line:

When the Aroon Down is above the 70 line, it indicates a strong down trend. Check the following picture. It is again AUDCAD hourly chart. You can see the highlighted area where the Arron Down line, which is the red line is above the 70 line and there is a strong down trend.

Aroon Up and Down moving parallel to each other:

When the Aroon Up and Down lines move parallel to each other, it indicates that the price is consolidating. Check the following picture. It is a chart. You can see the highlighted area where the Aroon Up and Down lines are moving parallel to each other. You can see the price consolidation here.

Aroon Up below the 50 Line:

When the Aroon up crossed below the 50 after a long uptrend and it is below 50 line, it means that the uptrend is weakening. Check the following picture. It is a NZDUSD daily chart and you can see that the Aroon up is above the 70 for quite some time and at one point it crossed the 50 line downwards and stayed below the 50 line for some time. You can see that the uptrend became weak.

Aroon Down below the 50 Line:

When the Aroon down crossed below the 50 after a long downtrend and it is below 50 line, it means that the downtrend is weakening. Check the following picture. It is a EURJPY hourly chart and you can see that the Aroon Down is above the 70 for some time and at one point it crossed the 50 line downwards and stayed below the 50 line for some time. You can see that the downtrend became weak.

Aroon Up Crosses Aroon Down Line Upwards:

When the Aroon Up Crosses the Aroon Down Line it indicates that an uptrend might be forming. This may not be true always, but you have to use additional indicators to confirm this. Check the following picture. It is a EURJPY daily chart and you can see that the Aroon Up indicator crossed the Aroon Down indicator upwards and it formed an uptrend.

Aroon Down Crosses the Aroon Up line Upwards:

When the Aroon Down line crosses the Aroon Up Line upwards, it indicates that a downtrend might be forming. This may not be true always so you may have to use additional indicators to confirm this. Check the following picture. It is a EURJPY daily chart and you can see that the Aroon Down line crossed the Aroon Up line upwards and it formed a down trend.

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