Qadir AK

Qadir AK
Author
Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.
Reviewed by: Mustafa Mulla
Mustafa Mulla
Reviewed
Mustafa has been writing about Blockchain and crypto since many years. He has previous trading experience and has been working in the Fintech industry since 2017.
Sep 15, 2023 06:25 UTC

Aroon Indicator: A Must-Read for Beginners in Crypto Trading

The first thing a new cryptocurrency trader should understand is that they should never let their emotions affect their trading decisions. Traders often forget this when assessing the strength of a trend. If a trader rely on non-emotional factors, like indicators, they can avoid making mistakes. This is where the importance of indicators like Aroon, which can accurately measure the strength of a trend, becomes relevant. Let’s explore this interesting indicator in more detail.

1. Aroon Indicator: All You Should Know

The Aroon indicator, created by Tushar Chande in 1995, assesses a trend’s strength by considering how long an asset’s price stays above or below a specific level.

2. Working of Aroon Indicator: The Basics

The Aroon indicator has two lines, Aroon Up and Aroon Down, showing the beginning and end of trends. If Aroon Up is high, it suggests a strong uptrend, while Aroon Down signals a strong downtrend.

3. Calculating Aroon Indicator

The Aroon Indicator is calculated using these two simple formulas:

Aroon Up = [(Number of periods – Number of periods since the highest high) / Number of periods] * 100

Aroon Down = [(Number of periods – Number of periods since the lowest low) / Number of periods] * 100

It measures the time an asset’s price reaches the highest and lowest points over a certain period.

4. Launching Aroon on a TradingView Chart: A Step-by-Step Guide

Here are the simple steps to launch the Aroon indicator on a TradingView chart:

Step 1: Sign In to TradingView

Log in to your TradingView account.

Step 2: Search for a Chart

Find a specific chart or select a random one you want to analyse.

Step 3: Launch the Chart

Click on the chart to open it

Step 4: Locate the ‘Indicator’ tab

At the top of the chart, you will see a toolbar. Click on the ‘Indicator’ tab.

Step 5: Find Aroon Indictaor

In the search bar, type ‘Aroon’ to locate the Aroon indicator.

Step 6: Add to Chart

Click on the Aroon indicator from the search results, and then click the ‘Add to Chart’ button.

Step 7: Configure the Indicator

You can adjust the settings of the Aroon indicator, like the number of period, to fit your analysis by clicking in the settings icon.

Step 8: Start Analysis

Once configured, you will see the Aroon lines on your chart. Analyse the Aroon lines to assess the strength and potential reversals of trends.

5. How to Read Aroon Lines

Let’s see how to read Aroon lines to underatansd Uptrend and Downtrend scenarios.

Uptrend Scenario

Stage 1 (Trend Initation)

A trend begins when Aroon Up crosses above Aroon Dow

Stage 2 (Trend Confirmation)

Confirmation of the trend occurs when Aroon Up crosses above 50% while Aroon Down falls below 50%

Stage 3 (Strong Trend)

A Strong uptrend is indicated when Aroon Up reaches 100%, and Aroon Down stays between 0% and 30%.

The Uptrend’s strength is at its peak when Aroon Up remains between 70% and 100%, and Aroon Down stays between 0% and 30% for an extended period.

Downtrend Sceneraio

Stage 1 (Trend Initation)

A downtrend begins when the Aroon Down line crosses above the Aroon Up line.

Stage 2 (Trend Confirmation)

Confirmation of the downtrend occurs when Aroon Down crosses above 50%, suggesting a strengthening bearish trend, while Aroon Up falls below 50%, indicating a decrease in bullish momentum.

Stage 3 (Strong Trend)

A strong downtrend is evident when Aroon Down reaches 100% and Aroon Up remain between 0% and 30%.

The downtrend is at its most powerful when Aroon Down remains between 70% and 100%, and Aroon Up stays between 0% and 30% for an extended period.

6. Endnote

The Aroon indicator is a valuable tool for assessing trends in trading. It helps traders understand whether an uptrend or downtrend is emerging and how strong it is. By following the steps to lauch the Aroon indicator on TradingView, traders can gain insights into market movements and make informed decisions. Remember that understanding how to read Aroon lines is essential for successful trand analysis, ultimately helping traders navigate the complex world of financial makrets more effectively.

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