Aroon indicator was developed by Tushar Chande to determine the price trend of a stock and also to understand how strong is the trend of the stock price. There are two lines in the indicator. The green line shows uptrend and the red line shows the downtrend. The green line is known as Aroon Up and the red line is known as Aroon Down. When any of the lines touch 100, it shows the trend is going to reverse. Similarly, when any line touches zero it also shows the imminent trend reversal. A combined reading of up and down line gives the real market trend. Zerodha Kite charts plot this indicator for traders.
Arron Indicator Formula
How to set up Aroon indicator in Zerodha Kite?
- Go to MarketWatch.
- Choose the stock you are going to trade.
- Right click on the stock and select chart from graphic icons.
- Chart window of the stock opens.
- Go to studies. Select studies.
- Go to Aroon and click on it.
- A small window opens with default parameters of the indicator.
- Once the parameters are selected the Done command is chosen, the parameters window goes off the screen and the indicator is plotted on stocks price.
- The default values can be changed as per own requirement. By default, the Aroon indicator considers a 14-period candle for plotting the chart.
Aroon indicator strategy in intraday –
- The indicator works well in all time frames.
- The picture above shows State Bank of India (SBIN) stock price movement with respect to the indicator.
- The chart shows 1 min. timeframe.
- A short position is created when the green line or Aroon up line touches 100 and Aroon down line is near zero which shows a strong trend reversal.
- The strategy shows the price trend. Understanding price trend from this indicator is important before creating a position.
- The short position is closed when the green line touches zero and the red line touches 100 showing trend reversal.
- A fresh buy position can also be created in such a scenario.
Aroon works well in creating bullish or bearish positions. Zerodha users can use this indicator for generating buy and sell positions alongwith an idea on trend strength.
Partha, an engineer by education, is theoratically actively following the stock and commodity markets since 1990. He is an active trader since 2003. He has received formal education in future and options and quantum analysis. He is presently working on research oriented projects using Python and data analytics.