This is practical example about how to use different indicators for technical analysis. As I understand - the author is using Aroon Oscillator in overbought/oversold way (and some other indicators as well ... I just saw MACD for divergence for example).
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Aroon Indicator Technical Indicator.
Developed by Tushar Chande. The Aroon indicator is used to determine if a trading instrument is trending or not. It is also used to indicate how strong the trend is.
The Aroon indicator is used to identify the beginning of a trend, the name aroon means morning or dawn. This indicator is used to identify a trend early thus its name.
The Aroon indicator has two lines
- Aroon UP
- Aroon DOWN
Aroon UP
Percentage of time between the start of a time period and the highest point that price has reached during that period.
If price sets a new high Aroon UP will be 100. For each new high Aroon stays at 100. However, if price moves down by a certain percentage, then that percentage is subtracted from the 100 and Aroon UP starts to move down. This means that if Aroon UP stays at 100 then price is making new highs but when it starts to move down then price is not making new highs.
If However price is making new lows for a particular price period then Aroon UP will be at Zero
Aroon DOWN
Aroon DOWN is Calculated the same as Aroon UP but this time using the lowest point instead of the highest point.
When a new low is set Aroon DOWN is at 100 and when a new high is set Aroon DOWN is at Zero.
Technical Analysis of Aroon Indicator
Aroon uses the 50 % level to measure momentum of the trend.
Buy Signal and exit signal
Aroon UP above 50 is a technical buy signal
Aroon UP dipping below 50 is an exit signal if you had bought the currency.
Sell Signal and exit signal
Aroon DOWN below 50 is a technical sell signal.
Aroon UP rising above 50 is an exit signal if you had sold the currency.
