Aroon Oscillator Indicator for MT4

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Aroon Oscillator Indicator for MT4

Introduction to the Aroon Oscillator Indicator

Trending markets are often described as markets that either consistently form higher highs or lower lows. Uptrend markets form higher highs, while downtrend markets form lower lows.

This indicator is based on this concept as it measures the distance between higher highs as well as the distance between lower lows.

What is the Aroon Oscillator Indicator?

The Aroon Oscillator Indicator is a technical indicator which shows the direction of the trend and momentum as an oscillator.

The Aroon Oscillator is different from other momentum indicators because it does not use price as its basis for momentum. Instead it detects the distance between new highs and new lows to detect momentum.

The classic Aroon Oscillator displays two lines, which are the Aroon Up and Aroon Down lines. This version of the Aroon Oscillator simplifies its display by plotting only one line.

This version of the Aroon Oscillator plots a line which oscillates around zero. It plots positive lines whenever the momentum bias is bullish and negative lines whenever the momentum bias is bearish. It also plots bars to indicate strong momentum. It plots dodger blue bars whenever there is a strong bullish momentum and red bars whenever there is a strong bearish momentum.

Aroon Oscillator Indicator for MT4

How the Aroon Oscillator Indicator Works?

The Aroon Oscillator uses an algorithm which calculates for the distance between new highs and new lows to identify two values, which are the Aroon Up and Aroon Down values.

Aroon Up = 100 x [(n periods – periods since n period high) / n periods]

Aroon Down = 100 x [(n periods – periods since n period low) / n periods]

This version of the Aroon Oscillator proceeds further to calculate for the Aroon Oscillator value, which is the difference between the Aroon Up and Aroon Down value.

Aroon Oscillator = Aroon Up – Aroon Down

This version also sets a threshold which would be used to identify momentum. This is preset at 50, although it can be modified within the settings.

It plots blue bars whenever the Aroon Oscillator value is above the bullish momentum threshold, and red bars whenever the Aroon Oscillator value is below the bearish momentum threshold.

How to use the Aroon Oscillator Indicator for MT4

The Aroon Oscillator Indicator has several variables which can be modified within the settings.

How the Aroon Oscillator Indicator Works

“Aroon Period” refers to the number of periods (n) which the indicator would use for its formula.

“Filter” refers to the threshold filter which would be used to detect momentum.

“Count Bars” refers to the number of bars which the indicator would be used for historical data.

Buy Trade Setup

When to Enter?

Open a buy order as soon as a blue bar is formed.

When to Exit?

Close the trade as soon as the blue bar disappears.

How to use the Aroon Oscillator Indicator for MT4 - Buy Trader

Sell Trade Setup

When to Enter?

Open a sell order as soon as a red bar is formed.

When to Exit?

Close the trade as soon as the red bar disappears.

How to use the Aroon Oscillator Indicator for MT4 - Sell Trade

Conclusion

This indicator is a very effective trend and momentum following technical indicator. It can effectively show the direction of the trend and momentum using its oscillator line. However, it is not perfectly accurate and should not be used as a standalone signal. It should be used in confluence with other technical analysis indications.

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Aroon Oscillator Indicator for MT4

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