Aroon versus same period Moving Average

Purple Brain

Experienced member
1,613 179
My primary trading method revolves around a 49 period exponential moving average based on closing price. I’m typically only taking longs with the price above it, or shorts with the price below. I have a few other lines and moving averages on the chart to keep it company and to provide context, but the focus is the price location in relation to that 49-er. I placed an Aroon indicator on my charts with the same 49 period and it’s given me a rather interesting contrast on a few of the FX majors I trade.

Usdjpy has been above the 49 moving average for the majority of this session and has even been above the other longer moving averages I have and ‘looks’ like it’s got a gentle upward slope to it. The aroon indicator has been telling a different story since 06:45 this morning, suggesting the pair in this 15 minute chart is in a down trend. Had I taken any long signals, I’d have been disappointed as there hasn’t been more than a couple of consecutive bull bars over the entire stretch. About an hour ago, the Aroon switch to bullish while the price dipped below the 49 moving average, where it still is. I’m still bullish this pair on my normal trading method and waiting for a long signal, but it’s interesting to note that if I do now get a long entry signal, using the aroon as an additional qualification for entry criteria, it’ll be from a far better level for entry.

A similar though mirror image situation exists for eurcad. I’m technically bearish this pair on the 15 minute chart and apart from a one bar short at 09:45 (which netted me but a handful of pips), the Aroon has been showing a bullish stance. Again, had I taken any other shorts against that aroon position subsequently, I would have again been disappointed.

On gbpusd which is a bit of a swinger at the moment without any longer term trend of obvious note, the aroon largely supports trades in line with my primary price/49 relationship bias. The aroon seems to serve as a useful additional indicator which in some cases (usd jpy & eurcad above) is quite counter to the normal visual and technical indications, which is probably more of a find than just another indicator which supports and confirms all the others.

Has anyone else had experience with Aroon which bears out these preliminary observations?
 

trendie

Legendary member
6,530 1,123
can you post up some screenshots of your observations?
also, do you know the formula behind the Aroon indicator?
 

Purple Brain

Experienced member
1,613 179
can you post up some screenshots of your observations?
also, do you know the formula behind the Aroon indicator?
Bullish is [periods - bars since highest high over periods / periods * 100
Bearish is [periods - bars since lowest low over periods / periods * 100

As for screenshots, not sure what you mean, but if you put a 49 ema on your chart and the aroon based on the same 49 period setting you'll see where they diverge and where they confirm.
 

Purple Brain

Experienced member
1,613 179
I've got a real sinking feeling this is the same swings & roundabouts you get with most 'new' discoveries in technical analysis. While the aroon contrasted with the price relationship to the 49 moving average kept me out of trades I wouldn’t have wanted to get into today (on usdjpy and eurcad) on a more general level, they also would have kept me out by about half the period number of bars, getting into trades I otherwise would have or did.
 

avano

Junior member
34 1
None of that stuff works in real trading unfortunately.
 
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