We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Mixed
GBP/USD
Bullish
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Bitcoin
Bearish
More View more
Real Time News
  • Recent polls have put Conservatives ahead of Labour and given a boost to $GBP. Get your #Brexit update from @ZabelinDimitri here: https://t.co/l2n53C0cYY https://t.co/oTWfXkaDDt
  • What are the truths and myths of #forex trading? Find out from @DailyFX analysts here: https://t.co/uF75VPzstr #FOMOintrading https://t.co/xeromAGqqx
  • Macro data from around the world have long attested to the urgent need for a trade settlement between the US and China. Increasingly the corporate numbers are saying the same. Get your market update from @DavidCottleFX here:https://t.co/Qon7QUO80c https://t.co/rCOG78QQ2M
  • #Gold prices may fall while the US Dollar gains even as economic policies championed by the Trump administration invite inflation. Get your market update from @IlyaSpivak here: https://t.co/4lHhHsby56 $XAUUSD https://t.co/JmZxckVHdS
  • Cable (GBP/USD) remains just off its seven-month high print around 1.3165 as traders start to move to the side lines ahead of next Thursday’s General Election vote. Get your $GBPUSD market update from @nickcawley1 here: https://t.co/CpCh13J9ZH #Brexit https://t.co/PIh6WUqbsK
  • (Weekly Technical Outlook) GBP/USD, EUR/GBP, GBP/JPY, GBP/CAD Outlook as UK Election Looms $GBPUSD $EURGBP $GBPJPY #UKelection2019 - https://www.dailyfx.com/forex/technical/article/fx_technical_weekly/2019/12/07/GBPUSD-EURGBP-GBPJPY-GBPCAD-Outlook-as-UK-Election-Looms.html?CHID=9&QPID=917702 https://t.co/iuILHYczJ7
  • Why do you require consistency in trading and why does it matter? Find out: https://t.co/WlEFlluGfZ #tradingstyle https://t.co/TkMtJQKatx
  • By issuing debt denominated in $USD, China is making a long-term bet that it will be cheaper to pay back its loans over time in the US Dollar; it believes the value of the US Dollar will fall. Get your market update from @CVecchioFX here:https://t.co/5GO9UrvO4y https://t.co/xV9urXXf48
  • What are some risk trading management techniques? Find out: https://t.co/RShdlDz9RA #tradingstyle https://t.co/M3ASPIHAep
  • #Dow Jones stages impressive recovery on a firm NFP report. #FTSE 100 eyes UK general election. Get your equities technical analysis from @JMcQueenFX here: https://t.co/o28UcG6N3l https://t.co/SwGAaFCFND
How to Trade the Aroon Indicator

How to Trade the Aroon Indicator

2012-08-21 16:49:00
Walker England, Trading Instructor,
Share:

Finding the direction of the trend is one of the most difficult tasks designated to any trader. A good example is the AUDCAD daily chart below. We can see price currently declining over 306 from its June 7th high which ended a 643 pip advance. So should a trader look to buy or sell the AUDCAD? How can we know if the trend has turned? Today we will look at an indicator to help us find the markets current directional bias. Let’s learn about the Aroon indicator.

How to Trade the Aroon Indicator

(Created by Walker England)

The Aroon indicator is derived from two lines, Aroon Up and Aroon Down. Both lines run in a marked range between 0-100 to help define a currency pair’s strength or weakness. The Aroon Down is depicted as a green line and as its name suggests helps track price in a downtrend. Aroon Up is depicted as a red line and measures the strength of an uptrend. Traders will watch both lines as they oscillate between 0-100 and change their market preference as one line crosses above the other. If Aroon Down is above Aroon Up the trend is considered down with price expected to go lower. The opposite holds true if Aroon Up is residing above Aroon down. With this in mind let’s go back and look at our AUDCAD example.

In the chart below we again see the AUDCAD daily chart, this time with the Aroon indicator. We can clearly see that Aroon Down has crossed over Aroon Up. This signal indicates that momentum of the currency pair has shifted and a new downward trend is developing. Traders then will expect price to continue to decline. This preference would be invalidated if the Aroon Down line crosses the Aroon Up line from above. As the indicator is showing prices moving lower, trend traders should continue to look for fresh selling opportunities.

How to Trade the Aroon Indicator

(Created by Walker England)

My preference is to look for continued weakness on the AUDCAD as long as Aroon Down resides over Aroon UP. One way to trade this market bias is to look for breakouts to lower lows. As indicated in the analysis above our low for this move resides at 1.0292, and traders can prepare with entry orders if this level is breached.

An alternate scenario includes price moving to higher highs. If this occurs traders will be notified as the Aroon Up crosses the Aroon Down.

Next: Measuring Volatility with Average True Range (19 of 50)

Previous: Breakout Trades and the Power of Price Channels

---Written by Walker England, Trading Instructor

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.