Blockchain and Cryptocurrency Advanced - Practical Demonstration of Buy and Sell Trade Using the Aroon Indicator
Buy – ANKR/USDT
On the ANKR/USDT chart, I made use of the Aroon indicator in combination with the EMA for buy signal on the ANKR/USDT pair made on the 1hr time frame. From the chart, the Aroon up line crossed above the Aroon down line which was a good buy signal. The signal confirmation was done with the 20 EMA and 50 EMA. The golden cross was already formed on the EMAs and the price was rising above the 20 and 50 EMA lines. For me, this was a good buy signal and confirmation for a buy. I entered the market at 0.17087 USDT and using the 1:1 risk-reward, I set my take profit at 0.19414 USDT and my stoploss at 0.14414 USDT.
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Sell – MATIC/USDT
On the MATIC/USDT chart, As usual, I made use of the Aroon indicator in combination with the EMA for sell signal on the MATIC/USDT pair made on the 1hr time frame. From the chart, the Aroon down line was above the Aroon up line nearing the upper limit. The death cross had already formed on the EMA lines. However, the Aroon down line was moving down towards the lower limit. However, the 20 and 50 EMA line didn’t not show any sign of trend reversal into the uptrend as the price was still below the 20 EMA and 50 EMA lines. The price was falling below the 20 and 50 EMA lines and for me, this was a good sell signal. I entered the market at 1.635 USDT and using the 1:1 risk-reward, I set my take profit at 1.733 USDT and my stoploss at 1.533 USDT.
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MATIC/USDT Chart
Merits and Demerits of Aroon Indicator
Merits
The Aroon indicator is an easy to use and simplified indicator that makes it easy for anyone to read the trends and strength of the trend in the market.
A very powerful indicator for identifying changes in trends in the market.
It can provide very good entry and exit signals especially when it is used in combination with other tools.
The Aroon indicator is known to generate very good buy and sell signals when combined with another technical indicator.
The indicator gives the freedom to be used on any timeframe and period length.
Demerits
Like most technical indicators, the Aroon indicator is also known to provide false or late signals on the chart.
It is not great for providing signals singlehandedly and needs to be used in combination with another indicator or tool for signal confirmation.
It is mostly period based and doesn’t take into consideration the size of the moves. That is why other indicator is required in combination to make the best trading decision.
The Aroon indicator has not only shown that it is a very powerful indicator when it comes to measuring trends in the market and the strength of the trend in the market, it has also proven to be very easy and simple to use. This is a big advantage as anyone can load up the indicator on the chart for technical analysis and price direction predictions. The Aroon indicator is not only powerful for identifying changes in trends in the market, traders can make use of this indicator for effective buy and sell signals and entry and exit signals when used in combination with other technical analysis indicators like MACD, RSI, EMA etc. However, it is very important to know that the Aroon indicator also gives false and late signals, that is why combining the Aroon indicator with other strategies, indicators or tools is a great way to make better trading decisions.
