5-Minute Strategy on the Aroon Oscillator
Aroon Oscillator - very interesting indicator, created relatively recently. It is not as popular as RSI, Stochastic, CCI or other bright representatives of its category, but its potential is no less extensive. In this article we will look at the trading strategy of the Arun indicator in combination with Sliding Average Arnaud Legu.
In fact, this is a classic combination of trend indicators and oscillatorsBut both of these tools are the latest developments in the field of online trading, so they are definitely worthy of careful consideration.
Review of indicators
Aroon is an oscillator consisting of a positive and a negative line, which move in a separate window with a 100-point scale. The external shape is classic for indicators of this type. The Aroon UP line is calculated using a formula that takes into account the number of price bars that appeared after the formation of the last peak value for a certain period specified in the settings. The Aroon DOWN curve works according to a similar scheme, but the formula takes into account the number of price bars from the period minimum.
As soon as the current price bar becomes maximum or minimum for a set period, then the corresponding Aroon oscillator curve immediately reaches the 100% value. As this level is approached, there are intermediate positions, so the line movements are not always zigzagging from 0 to 100 percent.
Moving Average Arno Lego (ALMA) - new type Moving Averagescreated by Alan Hal in 2009. There is no fundamental difference with other MAs. However, the strength of the indicator lies in its practical results. The creator of this tool has experimentally managed to achieve the optimal balance between accuracy and speed. This is the eternal problem of Moving Averages: higher accuracy leads to a lag trading signalsand decrease of lag leads to decrease of accuracy. So ALMA has found an optimal balance between the two extremes, which makes Arnaud Lega a very attractive tool for the analysis.
Preparing to trade on the strategy
To understand the high potential of the indicators, it is enough to try them out in practice. For this purpose it is not necessary to change the standard parameters of the period, except for appearance. Therefore, the preparation for strategy trading "Aroon" does not differ from similar instructions for other systems reviewed on our website.
- Open the chart TradingView for tehanalysis and trading terminal PocketOption (https://pocketoption.com/) (the best option for beginners), or another company from the rating of our site, with which you work.
- On both sites choose the same asset, the main criterion - the percentage of profit. But CRYPTO IDX is not suitable, because it is not in the list Live graphics, this tool is available exclusively as part of the Pocket Option.
- Set the candlestick chart interval to 1 minute.
- We add two indicators to the Live Chart: "Arun" and "Moving Average Arno Legu". They can be found manually in the catalog of built-in tools, or by using the search by inserting the name from the quotes.
- In the ALMA settings, go to the "Arguments" tab and set the parameters as follows: "Window Size" - 30, "Indent" - 0.85, "Sigma" - 6. It is also recommended to increase the thickness of the curve in the "Style" tab.
We leave the parameters of the Arun oscillator period unchanged, but it is recommended to optimize the appearance as follows. In the "Style" tab you should increase the thickness of both lines, as well as set a more contrasting fill color. For "Arun Up" - green, "Arun Down" - red. See the picture above.
ALMA is a classic Moving Average, so the signal is a crossover of the curve with the price chart. Arun is an oscillator, so the trader should pay attention to the intersection of its lines.
- A signal to go up - green Aroon oscillator curve rises above the red level. The ALMA line falls below the price formations on the chart.
- Down signal - The breaking of the ALMA by the descending red candle, as well as the exit of the red Arun oscillator curve over the green one.
The optimal moment to enter the market is the last seconds before the signal bar closes. The TradingView chart displays a real-time countdown before the candle closes. This allows the last 5-10 seconds to switch to the trading terminal, set up a trade and enter the market.
Expiry date of each contract must be equal to 4-5 minutes. The amount of investment in the deal according to the chosen strategy money management. The less, the safer in terms of risks. It is not recommended to invest more than 4-5% of your trading account balance. The Pocket Option is optimally suited for this strategy. The company's terminal is adapted for trading 1-5 minute fixed "Above/Lower" contracts.