Aroon is a relatively lesser known indicator. But this does not necessarily mean that it is less effective. It is as effective as any other indicator, but not even better.
The basic idea of the Aroon indicator, which can be downloaded on MT4, is to detect the kind of trend (uptrend or downtrend) that occurs in the market. It also assesses the strength of the trend and alerts traders to the possibility of a price reversal. In addition, it helps traders to detect the possibility of consolidation and corrective retracements in the market.
How the Aroon indicator works
The indicator consists of Aroon down and Aroon up down. Aroon up is a measure of the value of the trend, while Aroon down is a measure of the downtrend within the market. These two lines assist traders in identifying price movements and help them predict buying and selling pressure in the market by assessing the importance of downtrends and uptrends within the market.
The indicator displays an oscillator on the price chart with values between 0 and 100, with the two curves oscillating between the values. For example, if there is an indication that the Aroon up is higher than the Aroon down, this would indicate an uptrend. Furthermore, when the Aroon is 50 values above the market, this is a sure sign of a substantial uptrend. This is confirmed by the Aroon positioning down below 30.
Similarly, if you see the Aroon down above the 50 mark and the trend is downwards, this is solid. This is further supported by the rising Aroon line being near zero. However, if the two Aroon lines are close together, that is an indicator of increasing strength.
If a line is close to the 100 mark, it means that the trend is established and strong. If it crosses the 30 market and then goes back into negative territory, this indicates that the pattern could turn into a weekend and could lead towards a reversal.
This is an excellent indicator for tracking trends. It can also help you to determine the direction of the trend and to predict possible price reversals.