|By Nathan Young|
July 14, 2017
Technical analysis is one of the most popular analysis out there and with that comes the various tools and indicators that can help you zone in on trades. The Aroon indicator is an indicator that is used to help you the trader find the different trends that are out there.
If you have seen this indicator before, you will note that there are two lines that operate within this tool. They are called the Aroon up and Aroon down. What makes this simple is the up line measures the strength of the chart going to the upside and down measures the strength of the chart going down.
The tools runs from zero to one hundred indicating the strength of the trend. The higher the current directional line the stronger the trend may be at the current point in time. With that, you still have to watch the markets because not all indicators are perfect, but rather a tool to help you find potential entry points.
Some other chart plots you could use are standard deviation levels or Bollinger Bands as these can help you confirm a directional change in the market. What you have to notice is this indicator does not take into account fundamental data and that means you still have to look under the hood of the company to understand how the company is operating. Using both technical and fundamental analysis together will help to give you the most well rounded opinion.
Testing on a demo account first is key because this will let you test out the tool without risking your hard earned money. Also, this is a popular indicator so there are many different write ups out there on the Internet to help you understand the tool more. Finding trends in a chart is important especially for those who are long term investors or swing traders.