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.
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.
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.
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.
Here are the simple steps to launch the Aroon indicator on a TradingView chart:
Log in to your TradingView account.
Find a specific chart or select a random one you want to analyse.
Click on the chart to open it
At the top of the chart, you will see a toolbar. Click on the ‘Indicator’ tab.
In the search bar, type ‘Aroon’ to locate the Aroon indicator.
Click on the Aroon indicator from the search results, and then click the ‘Add to Chart’ button.
You can adjust the settings of the Aroon indicator, like the number of period, to fit your analysis by clicking in the settings icon.
Once configured, you will see the Aroon lines on your chart. Analyse the Aroon lines to assess the strength and potential reversals of trends.
Let’s see how to read Aroon lines to underatansd Uptrend and Downtrend scenarios.
A trend begins when Aroon Up crosses above Aroon Dow
Confirmation of the trend occurs when Aroon Up crosses above 50% while Aroon Down falls below 50%
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.
A downtrend begins when the Aroon Down line crosses above the Aroon Up line.
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.
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.
Also Read: A Fresh Start: A Beginner’s Handbook to Crypto Trading with Parabolic SAR
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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