The Aroon Indicator consists of 2 lines that track the high and low prices over the last 25 periods. The lines move from 0 to 100, with 0 meaning price is in a weak trend and 100 a strong trend. When the Aroon Up line crosses over the Aroon Down line, it indicates a long signal. A short signal is when the Aroon Down line crosses over the Aroon Up line.
With this strategy, we will enter long when the Aroon Up line crosses over the Aroon Down line. The long exit will be when the Aroon Up line goes below the 50 value. And for shorting, we’ll enter short when the Aroon Down line crosses over the Aroon Up line. The short exit will be when the Aroon Down line goes below the 50 value.
Aroon Indicator strategy for the SPY on the 15min timeframe
Results
Testing this strategy on the SPY has returned the following profit factors:
- 1min: 0.924
- 5min: 1.197
- 15min: 1.251
- 30min: 1.071
- 1hour: 1.043
- 4hour: 1.14
- 1day: 1.156
- Average: 1.112
This strategy works best on the 15 minute timeframe, and on the 5 minute timeframe for 2nd best. Adding a 200 moving average could help improve the score, but we’ll test that in another time. Remember, different ticker symbols can provide different results.
TradingView Script
Try the Aroon Indicator strategy for yourself on TradingView: https://www.tradingview.com/script/8hdFC8xR-Aroon-backtestx/
Test with your own tickers and timeframes to see how well it works!