Conclusion The Aroon indicator helps traders identify whether price is trending or range-bound.
Interpretation If one is to use the Aroon indicator as part of a trend-following strategy, the primary assumption inherent in the idea is that a security or index will close at new highs in an uptrend and new lows in a downtrend.
The Aroon is based on a scale.
Fifty 50 is the midpoint of the indicator. If we shorten this to a period of 14, which is often the default setting, we produce the following: Here, due to the recent action displayed in the chart — a large bout of volatility relative to the previous period — it shows the downtrend as being very strong relative to the uptrend.
This simply means that for those using trend-following systems, one might be biased in favor of shorting the index over going long due to recent weakness.
But it is, of course, very much open to the interpretation of the trader. Overall, the shorter the period, the more the indicator will move around as less data is included and the range of possible values declines.
How to set the period of the Aroon largely depends on your trading style. Longer-term traders should naturally set it to longer time periods. Shorter-term day traders should set it to either short-term to reflect their trading style or longer-term to stay abreast of the long-term trend.
Conclusion The Aroon indicator is very similar to a moving average but with a specialized focus on the turbo binary options reviews since the most recent high or low. It is primarily used by those who use a trend-following strategy.
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How a trader uses aroon binary options indicator Aroon should be predicated on the timeframe one trades or to gain a better understanding of the overall trend.
A shorter-term trader is likely to use a shorter period, but not so short that it generates too much noise e.