Aroon Indicator Definition
Aroon Indicator is a technical tool used across different markets, including cryptocurrency trading, to measure the direction and strength of a trend. It was developed by Tushar Chande in 1995, with “Aroon” being Sanskrit for ‘dawn’s early light’. This tool essentially aids traders in identifying the beginning of a new trend or the continuation of an existing trend.
Aroon Indicator Key Points
- It’s a tool used in trend-spotting, particularly useful in cryptocurrency market due to its volatile nature.
- Developed by Tushar Chande in 1995.
- Consists of two parts, ‘Aroon Up’ and ‘Aroon Down’, each ranging between 0 and 100.
- Provides indications of the strength of a trend.
- Helps identify potential reversals and the start of new trends.
What is the Aroon Indicator?
The Aroon Indicator is a system that aids in the identification of trend changes in the price of an asset, as well as the strength of that trend. In cryptocurrency trading, the ‘Aroon Up’ indicates the strength of the upward trend, and the ‘Aroon Down’ shows the strength of the downward trend.
Who uses the Aroon Indicator?
This indicator, while being useful for numerous markets, is especially beneficial for those dealing in cryptocurrencies. Due to the high volatility of the cryptocurrency market, where price trends can dramatically shift, traders utilize the Aroon Indicator to mitigate risk and make better-informed decisions.
Where is the Aroon Indicator applied?
It is utilized in any trading platform or software that supports technical analysis. Traders apply it to the price chart of the cryptocurrency that they are interested in trading, in order to spot trends.
When to use the Aroon Indicator?
Traders generally use this indicator when they are trying to spot new trends in the early stages or to confirm the strength of ongoing trends. It can also help to signal the end of a trend, indicating that it might be time to sell or buy.
Why is the Aroon Indicator important?
The importance of the Aroon Indicator lies in its ability to spot trend changes or continuations early on. Early detection allows traders to capitalize on these changes more effectively, potentially leading to higher profits.
How does the Aroon Indicator work?
The Aroon Indicator comprises the ‘Aroon Up’ and ‘Aroon Down’ lines- both ranging from 0 to 100. If an up trend is strong, ‘Aroon Up’ will be in the 70-100 range and ‘Aroon Down’ will be in the 0-30 range. The opposite is true if the trend is downwards. Cross-over of the lines can suggest changes in trend strength, from bullish to bearish or vice-versa.
