Aroon Oscillator

The Aroon Oscillator is calculated by subtracting Aroon Down from the Aroon Up indicator. It is interpreted as follows:

* Above 50 is considered a strong uptrending market
* Below -50 means that the market is trending lower;
* Near 0 means that the market is in transition and not trending.

The chart below of the mini-Dow Futures contract shows both the Aroon indicator and the Aroon Oscillator:

The chart below of the Gold futures contract shows how the Aroon Oscillator is interpreted:

A decrease of the Aroon Oscillator from above the 50 line shows that the uptrend is consolidating and is reversing direction downward. When the Aroon Oscillator hovers around the zero line over time, then the market is in a directionless period.

When the oscillator moves toward -50 from the zero line, the market is beginning to trend downward. And when the Aroon Oscillator is below -50, then the market is in a strong downtrend.

When the oscillator begins to move upward towards the zero line, the downward trend is slowing down and beginning to reverse direction.

In addition, when the Aroon Oscillator moves higher from the zero line, then the market is moving from a period of non-trending to a period of uptrending.

The Aroon indicator and Aroon Oscillator are extremely helpful tools for a trader to have and use; the Aroon indicator helps traders to determine when best to apply trending following indicators like Moving Averages (see: Moving Averages) and when best to use oscillator type technical indicators like Stochastics (see: Stochastics).

Aroon Indicator

The Aroon indicator is used to help traders know when a market is uptrending, downtrending, or is in a range-bound, trendless market.

Knowing when a market is trending is very useful, mainly because trend following technical analysis indicators are profitable during trending markets but cause losses during non-directional markets. Similarly, oscillators are extremely profitable indicators during range-bound markets, but perform very poorly during strong trending markets. The Aroon indicator can show which mode the market is in.

The chart of the Nasdaq 100 shows the different modes of the market and how the Aroon indicator reacts to these different market modes:

Interpreting the Aroon Indicator

When the Aroon Down indicator (in red above) is above the 70 line and the Aroon Up indicator (in greed above) is below 30, then the market is trending downwards.

In contrast, when the Aroon Up indicator is above the 70 line and the Aroon Down indicator is below 30, then the market is trending strongly upwards.

When the Aroon Up and Aroon Down indicator move towards the centerline (50), then the market is entering into a consolidation period.

By varying the period length, the Aroon indicator can give long term indications of trend or short-term indications of trend. By default, the Aroon indicator is 25-periods (shown in the chart above), but a shorter time frame could be 10-periods.

Aroon indicator that combines both the Aroon Up and Aroon Down is presented on the Aroon Oscillator.

Become a Better Trader

It is a well documented fact that within the “business” of trading the financial markets, as much as 90 % of the participants lose and continue to lose money. So if 90 % are losing, that therefore means that 10% are gaining each and every time.

In order to improve my own trading record, I deliberately set out to try and discover what it was I had to do to become one of the 10% (The Winners) who are consistently making money from the unfortunate remaining 90% (The Losers) who don’t.

My research and investigations was to speak to as many successful traders as I could, to read as many articles, publications and books which have been written by successful traders. It wasn’t until I started my research, that I quickly realised just how much has been and no doubt will continue to be written about trading and the psychology of trading. What is even more astounding is the amount that has been written by so called “gurus” who actually haven’t made any significant amounts of money from a business that they are supposed to be experts in. I will tell you about some of my findings relating to these authors in future articles.

It is my intention to publish my findings in a series of articles over the next 3 months and I hope you can learn and improve your own trading from implementing the information which I release.

I personally trade the FOREX market now but I have tried trading stocks, futures, commodities and options. I will be covering the reasons for concentrating on FOREX in a later article but in the meantime let me tell you about one of my many discoveries.

Every one of the successful traders I interviewed, stressed the importance of keeping a journal of their trades. They would record the date, time, what they traded, buy or sell, price, indicators used including levels and/or figures, trends (long, medium and short) and an overall description of why they took the trade. It was also imperative that the journal entry included notes about the trade after the event. If it made money what was the criteria, and if it was a losing trade, why had it turned out to be like this and any contributing factors.

Now comes the interesting part. Everyone of them stated that they regularly reviewed their journal (some weekly and some monthly) but everyone quite categorically looked back over past trades. No doubt learning from their mistakes and to improve and repeat on their successful trades.

Trading is very disciplined with definite rules for entering and exiting trades. These rules must be adhered to at all times and one of the rules is entering all details about the trade in the journal, making no exceptions.

I hope you will all learn something from this and if you aren’t already maintaining a record of your trades, then please start doing so from now on. Also regularly go back over your records on a regular basis.

7 Easy Tips: Trading Style and Trading Strategies in Forex Software

As you may know, Forex is a profitable but risky form of investment, which is why many investors are interested in minimizing risks by trading with the help of a Forex Expert Advisor or automated trading robot.

A trader can reap many benefits from using a FX robot. If you want to improve your profitability in the Forex market do some research and look for best option there is for you out there...

What Forex investors really want is to complement their trading strategies or to automate the task. Oftentimes new investors experience frustration when trying to find the right FX trading system, because they can't find one that suits their trading style...

So today we'll go over 7 easy tips on how to look for those automated trading robots that complement your trading style with the right set of strategies:

* When you're on the look our for your trading robot, check if the sales page says what their trading robot does or how it does it. If the website is not very clear or you can't find answers to your technical questions read between the lines the information again and contact the developers if you have specific questions...if you can't get answers I suggest you continue your search somewhere else...

* What if you want to adjust the settings in order to have more control over your trades? Depending on you degree of knowledge and trading strategies you may need more "flexibility". If you would like to have more control over your trades then your best bet could be a system that allows you to do partial manual trading and get more involved, look for a good Expert Advisor.

* Make sure that the software has the capability of analyzing the market. You have to look into the factors that make the products work.

* Some Forex robots would use bad money management strategies, so try to find out about that and avoid systems that show no solid proof of successful trades or haven't been updated for a long period of time.

* If you had bad experience with an automated system before try to get rid of the idea that all Forex trading programs are all scams. Be patient and keep looking for the ideal trading software for you.. Be determined to find the best Forex Expert Advisor there is and suits your level of expertise and trading style...

* The best forex trading system will count with a selection of different strategies that you can use in different market conditions and you need to make sure that they all (or most) suit the way that you want to trade. For example, your FX robot could have long and short term trading strategies, or one strategy for a choppy market and another for a stable market.

* Your want to focus on those systems that go along with your trading style and knowledge, and would probably work for you, and then narrow down your selection from there...

If you keep these tips in mind it will be easier for you to find really good Forex trading software...
And happy trading!

Author: Denis Marsili