Trading Crypto with Aroon Indicator- Crypto Academy / S5W2 - Homework Post for @fredquantum

Hello everyone. A very warm welcome to everyone in this week of season 5. This lecture is delivered by professor @fredquantum which is about the @roon Indicator. This is my homework post.

---

---

Aroon Indicator

Multiple indicator are being used in the crypto world for analyzing the market. he traders use these indicator to predict the future of market, market behavior, price movement and much more. The indicator's output is highly useful which direct the traders what to do next. In light of this information, the traders take the important trading decisions and trade successfully.

Aroon indicator is a technical indicator which was developed by the Tushar Chande in 1995. This momentum based indicator use to determine the continuation of the trend of an assets. The trend can be bearish or bullish. The default time period for Aroon indicator is 25 which is set by the developer of this indicator but one can change the setting according to his trading plan and strategies.

This indicator determine the current trend of an asset in market and indicate the trend strength. It has two lines which are known as the Aroon-up and Aroon-down. It also use to determine the possible trend change . The traders can also indicate whether the market is in trading range by using this indicator. The traders get the good entry and exit points in the market.

This indicator measure the time difference between high and low movement of price in a certain time period in trending market. When market is trending upward, the higher high moves are formed The Aroon indicator measure the time difference between the higher high moves in bullish trend. Similarly , When market is trending downward, the lower low moves are formed. The Aroon indicator measure the time difference between the lower low moves in bearish trend.

This indicator focus on the price behavior of the asset for the certain period of time and provide huge information which traders use in trading to get more profit. The Aroon lines are bound between 0-100 bands.

Aroon-Down

When the lines are closer to the 0 band, it indicate that the strength of trend is low. This indicate the lowest price point of the asset at a certain time period. This mean that the price of coin is moving downward and market is in bearish trend. The color of the Aroon-down is usually blue by default. The indicator confirm the bearish trend when the Arron down line by cross and move above the Aroon up line.

When the Arron lines cross each other, it indicate the trend reversal. The above screen short showing the downtrend where the Aroon down cross the aroon up and move close to the 70-100 bands of the Aroon indicator.

Aroon-Up

When the Arron lines are closer to 100 band, it indicate that the strength of trend is high. This show the highest price point of the asset at a certain time period. This mean that price of coin is moving upward and market is in bullish trend. The color of the Aroon-down is red by default. When the blue line cross the Arron down line and stay above, the higher high moves of price are formed on the chart where each higher high is closer to the 100 band.

The above screen short showing the uptrend where the Aroon up cross the aroon down and move close to the 70-100 bands of the Aroon indicator.

---

---

1- Arron-Up

• Aroon Up = 100 x [(n - periods from the previous 25 Period High)/n

• n is the number if period being choosen

• For example i have choosed n as 25 then;

• Aroon Up = 100 x [(25 - periods from the previous 25 Period High)/25

---

For example let consider the ADAUSDT chart

Highest High price = $2.199
Periods since high price = 12

• Aroon Up = {(25 - 12)/25}x 100

• Aroon Up = (13 / 25] x 100

  Arron Up = 0.52 x 100

• Aroon Up = 52

---

The Aroon Up indicating 52 shows that the recently has started the bullish trend

---

2- Aroon Down

• Aroon Down = 100 {(n - Number of periods from the previous 25 Period Low}/n]

---

• n is the number if period being choosen
• For example i have choosed n as 25 then

• Aroon Up = {(25 - number of periods from previous 25 Period Low)/25} x 100

---

• For example let consider the BTCUSDT chart

• where highest price = 58402.62

• Number of period = 6

• Aroon Down = 100 x [(25 - 6) /25]

• Aroon Down = 100 x (19 / 25)

• Aroon Down = 76

---

---

Adding Aroon indicator to Price Chart

• To show how to add the Aroon indicator on price chart, go to the tradingview website.

• Open the chart of coin for your own choice

• Click on the indicator icon

• Search for the Aroon network. Type it on search bar

• Click on the Aroon and it will appear on the chart

• You can change the setting of the indicator by clicking on the setting icon.

• In the input section, yo can change the period.

• In the style section, you can change the style

• In the visibility section, you can alter the visibility option as per your trading planning.

---

---

Aroon Oscillator

Arron oscillator is type of the Aroon indicator which is contain on the single line. This line oscillate between rage of -100 to 100. This is highly useful as the traders can indicate the current market trend. The Arron oscillator also use for indicating the trend reversal. When the oscillator move closer to the 100, it indicate the uptrend. Oscillator movement closer to 100 show that the uptrend is strong.

When the oscillator line cross the mid point, it indicate trend is going to change. It can be downtrend or uptrend. When the line cross the mid point and move upward, it indicate price is rising upward. When the line cross the mid point and move downward, it indicate the price is falling down.

When the higher highs moves are formed on the chart, the oscillator move toward 100 points. When the oscillator move closer to the -100, it indicate the downtrend. When the lows are formed on the chart, the oscillator move toward the -100 points. Oscillator movement closer to -100 show that downtrend is strong.

---

---

50 and -50 Aroon Oscillator Bound

Aroon oscillator is highly useful. The traders can use this indicator to indicate what the ongoing trend in the market. This can be determine by observing the movement of the oscillator line. When the oscillator move around the +100, it indicate the bullish trend. The line move above the zero point and price move upward.

When the oscillator move around the -100, it indicate the bearish trend. The line move below the middle point and price move downward. Moreover, this can also be use to determine the trend reversal. When the line cross the middle point, it indicate the the trend reversal.

When the price of the coin move upward to middle point and touch the +50, it indicate that the price of the coin move upward. This indicate the bullish trend. When the price move more above the +50, this show that the uptrend is strong. When the price of the coin move downward to middle point and touch the -50, it indicate that the price of the coin move downward. This indicate the bearish trend. When the price move more below to the -50, this show that the downtrend is strong.

---

Question 6. Explain Aroon Indicator movement in Range Markets. (Screenshot required).

---

The range market is when there is no strong trend in the market. The price of the asset move in sideway. There is no uptrend or downtrend in the market rather the price move between the defined resistance and support level. The uptrend market is when the buying pressure is high. In downtrend price movement, the selling pressure is high. But in Range market, the buying and selling pressure is not in control.

This phase show that the price of coin is struggling to be in control. There is no cross section of Aroon up and aroon down. The price fluctuate and show the sideway movement.

The above chart is showing the sideway movement of the price. There is no clear trend in market. The lines are not crossing each other but are fluctuating and showing the sideway movement thus we can say market is in range. This is showing that neither buyer nor seller are in control.

---

Question 7. Does Aroon Indicator give False and Late signals? Explain. Show false and late signals of the Aroon Indicator on the chart. Combine an indicator (other than RSI) with the Aroon indicator to filter late and false signals. (Screenshots required).

---

False Signals

---

No indicator is 100% accurate. Indicator may produce wrong signal which may mislead the traders. The traders may take the decisions sing those signals and face loss. Similarly, the Aroon indicator also sometime produce the wrong signal. This indicator use the past price data history because of which the wrong signals are produce sometime which misguide the traders.

A false aroon signal is generated when the indicator lines cross each other and move in opposite direction to the price direction. When the aroon indicator lines cross each other and started moving in upward direction but price of the coin show the downtrend, the false signal is generated then. Similarly when the aroon indicator lines cross each other and start moving in downward direction but price of coin move upward, we can say that the wrong signal is produced.

Late Signals

The Aroon indicator is a lagging indicator which use the previous price data for calculation. Thus the late signals may produce. The price start moving first and then the indicator value is computed because its value use the previous price data. The late signals are then produced.

Combine an indicator with Aroon Indicator

Multiple indicators are being use in the crypto world for analysis of data. The traders use these indicators to get the idea about the market behavior. But when we use the indicator while combing with other indicators, it accuracy get enhanced.

Similarly when the aroon indicator is use while combining with other indicators, its accuracy and efficiency get enhanced. We get the more accurate result. The more effective is when we use the SMA indicator while combining with Aroon indicator. Combination of these two indicator enhanced the accuracy of result and false signals and late signals are reduced to the great extent.

---

---

1- Buy Trade ETHUSD (4H)

From the above screen short, the buy signal is produce when the EMA 8 cross the EMA 21 and move upward. This is also confirmed from the aroon indicator. The aroon up cross the aroon down and move above.

I placed a buy order at 4433.19$ by setting the stop lose at 4138.91$ and take profit at 4777.45$. I set the stop lose with 1:2 ratio and then place the buy order to take more profit and set the stop lose just at 4138.91$ as i could take risk only losing this amount.

---

• ADA/USDT SELL TRADE

---

From the above chart, the EMA indicator signal produce the selling signal when the 21 line cross the 8 line. We can confirm the sell signal by the aroon indicator too. The aroon down line cross the aroon up line and move upward.

The sell order of ADA/USDT was placed at $1.861, take profit at $1.503, and stop loss at $1.924.

---

---

Merits of Aroon Indicator

Below are some merits of aroon indicator.

• Multiple signals

The aroon indicator is highly useful as this indicator produce the multiple signal. The aroon indicator can be use to determine the trend, strength of trend. You can get to know the reversal of trend.

• Easy to Understand

The graphical representation of the Aroon indicator is quite easy. It contain only two lines. The movement of use these two lines are use to find out the trend reversal, trend strength, etc. This indicator has simple graphical representation.

• Trade signal

The Aroon indicator is use to generate the trade signal. You can find out the best entry and exit spot.

• Trend identification

The Aroon indicator is use to generate the trend signal. The cross over of Aroon lines indicate the trend reversal. When the Aroon up move upward, it identify the uptrend. Whe the aroon down move upward, it identicate downtrend.

Demerits

• Lagging indicator

The Arron indicator use the past price value to calculate. That why this indicator is known as the lagging indicator. Because of this the false signal or late signal may be produce sometime which mislead the traders.

False Signal

The aroon indicator have the lagging nature because of this the indicator sometime produce the wrong signal which result in lose of money of trader. When the trader make decision while using such signal, they face lose.

Late signal

The past price data is use for calculation in aroon indicator. That is no directly linked with the current price of the asset. This lagging nature sometime produce late signal.

---

---

Aroon indicator is a technical indicator which was developed by the Tushar Chande in 1995. This indicator determine the current trend of an asset in market and indicate the trend strength. It has two lines which are known as the Aroon-up and Aroon-down. This momentum based indicator use to determine the continuation of the trend of an assets. The trend can be bearish or bullish. It also use to determine the possible trend change .

This indicator measure the time difference between high and low movement of price in a certain time period in trending market. This indicator focus on the price behavior of the asset for the certain period of time and provide huge information which traders use in trading to get more profit. The Aroon lines are bound between 0-100 bands.

When the lines are closer to the 0 band, it indicate that the strength of trend is low. This indicate the lowest price point of the asset at a certain time period. This mean that the price of coin is moving downward and market is in bearish trend. When the Arron lines are closer to 100 band, it indicate that the strength of trend is high. This show the highest price point of the asset at a certain time period.

But sometime it may produce the false or late signals which misguide the traders.

Note: All screen shorts are taken by me from tradingview website