AROON is the trend indicator and is used to determine the market’s movement and its force. Apart from this, this auxiliary tool can determine the transition of a market into the flat condition (when the clear trend is absent). Determination of the trend is very important for trading.
Overview of AROON indicator
The binary options’ indicator Aroon uses the certain amount of time periods in its work. The plotting of the indicator’s lines occurs from the time when the new extreme points appear within the certain time ranges.
Aroon Up (it is usually a blue line on the indicator’s chart) shows how many time periods passed after the appearance of the daily maximum on the price chart. As for the Aroon Down, this line (usually red or orange on the price chart) shows the amount of time periods which passed since the appearance of the day maximum.
If the Aroon Down line is located above the level of 70 on the binary options’ indicator’s chart, and the Aroon Up line is located below the level of 30, then there is the bearish trend in the market. If the situation on the indicator is opposite, it is a sign of the formation of the bullish trend, which is also called the ascending trend. These parameters are clearly marked on the vertical scale of the chart.
Both Aroon lines taken together form an oscillator. It is calculated as the difference between Aroon Up and Aroon Down. The oscillator can oscillate between values of +100 and -100. The 0 mark is used as the boundary line. You can interpret the Aroon indicator in the following way. If it is located above the level of 50, a strong ascending movement is present in the market. If the oscillator is located below the -50, the bearish spirit prevails in the market. And if the binary options’ Aroon indicator moves near the 0 line, a flat is observed in the market.
Work with AROON indicator
Work with the Aroon binary options’ indicator is pretty simple. If the Aroon oscillator is located below the +50 level, it means that the market consolidates in order to start the following ascending movement. So, you may consider the Call options’ purchase. If the oscillator moves near the 0 level for the certain period of time, we can conclude that there is the sideways movement in the market. It is not recommended to buy any binary options at this time. It is better to wait until the clear signals of the indicator appear.
Purchase of the Put binary options is recommended when the indicator-oscillator Aroon’s crosses the neutral line and starts moving to the -50 level. If a trend settles below the -50 level, it will be the confirmation of the descending trend’s force.
Both Aroon binary options’ indicators are very important auxiliary tools for a trader. This is because they not only help to determine a trend, but also allow determining a possibility of its reverse in the nearest time. The first indicator Aroon can be referred to the trend’s category, it determines, whether a trend is present in the market, and helps a trader to make a decision regarding working within the current trend. The second indicator and oscillator Aroon helps a trader to determine a trend and its possible reversal points. In fact, its work consists in the search of the overbought and oversold zones in the market. When such time comes, the professional traders try to refrain from trading and wait for signals in the opposite direction.
The binary options’ indicator Aroon and the oscillator Aroon have to complement each other and send the coincidental signals. If it is not so, you have to pay attention to the other indicators, which can either confirm the presence of the strong trend in the market or show the possibility of the upcoming reverse of the current movement.