Like most technical indicators, the Aroon tool can also project false signals, hence the need to combine it with other indicators such as the Williams% R Indicator, as with this other indicator you can confirm momentum zones and determine which segment of the market is in control.
False signals
Notice in the following chart example in the price action of the TRX/USDT pair, how the Aroon-Down indicator crosses the Aroon-Up line generating a false bearish signal, and conversely the Williams% R Indicator is above -20 approaching 0 indicating probable uptrend strength.
Late signals
The Aroon indicator can also reveal signals after a trend has already been set by price action, a response of the Aroon indicator considered as a late signal.
Notice in the following chart example in the price action of the VET/USDT pair how the Aroon-Down indicator crosses the Aroon-Up line generating late bearish signal, and on the contrary the Williams% R Indicator has been making range above the 0 line, which had already revealed a potential change from bullish to bearish.
That's all for now, in the next post I will run demonstrations with real buy and sell trades using the Aroon indicator with the help of the other indicators.
SOURCES CONSULTED
AvaTrade Aroon Indicator Trading Strategies. Link
OBSERVATION:
The cover image was designed by the author: @lupafilotaxia, incorporating image: TradingView
Greetings @lupafilotaxia this tool in a way suits different styles and needs of trading, however like any other indicator is not a panacea and therefore has hits and misses, I find it very interesting that you have addressed the perhaps negative aspects of the indicator where you present what are the late entries that may occur and that can lead to economic losses at the time of entry into the market.
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Hello dear friend, as always you bring us very valuable information, you are very good at trading, that's great because who knows how to do it and has to invest can have very good income. Thanks for the information.
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Hi
The technical indicators can be a boon however to know if they are going to mislead is a definite advantage and can help in making the right investment decision
Thanks @lupafilotaxia for this informative post
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