Build An Aroon Strategy
Aroon shows you a momentum trade and we will using candle periods of 70 and 30 to indicate this in our lesson.
1. After logging into your account, click the ‘Build a Strategy’ button in the top right-hand corner.
2. Let us begin by creating a new strategy by clicking ‘Build a New Strategy’
3. Once in the build a strategy tab, give your strategy a name, add the symbol set you want to trade and the candle duration.
4. When you are ready to start defining your strategy click ‘Create’ at the bottom of the screen, this will take you to the strategy overview page.
5. Begin defining your strategy by selection ‘New Condition’ at the bottom of the screen. Our strategy builder allows you to build condition met statements.
6. Begin your statement by selecting ‘Indicator’, from there select ‘Aroon’.
* The Aroon indicator is a technical indicator that is used to identify trend changes in the price of an asset, as well as the strength of that trend. In essence, the indicator measures the time between highs and the time between lows over a time period. The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows. The indicator signals when this is happening, and when it isn’t. The indicator has four significant values, 0, 30, 70 and 100. Aroon up at 100 means the market has just made a new high for the entire momentum period. Aroon down at 100 means the market has just made a new low for the entire period. Aroon up at 0 means the market has not made a new high since the start of the period. Aroon down at 0 means the market has not made a new low since the start of the period.*
7. From here you will need to enter a period of your choice (this will indicate the number of candles you want to use, and the length of a candle will be defined on your strategy overview page). Let’s stick to market standard and use 14 to indicate the period. You will also be asked to input a ‘’Direction’’, let’s start with ‘’UP’’
*** When the up line is above 70 and the down below 30, this is a market with strong bullish momentum (this will be our ‘’Buy’’ signal). When the down signal is above 70 and the up line below 30, this is treated as strong bearish momentum (this will be our ‘’Sell’’ signal). ***
8. Now that we have defined our statement lines, we now need to set our money management. Once in ‘Manage Money’ the first line will be ‘Trade Amount’ which is what we use to set the size of each contract that will be booked when the condition of our statement line is met. In this example we want to book 100,000 so we enter 1 into this space.
9. The next line is ‘Position Stop Loss’ this is the amount in pips that we are willing to lose on each trade. In this example we will use 20pips as our stop loss.
10. The next line ‘Strategy Stop Loss’ is what we use to set out how many times we are willing for the trade to make a loss. For example, if we want this strategy to lose a maximum of 10 times, we will set out strategy stop loss at 10 x 20 = 200pips.
11. After setting these we then set our ‘Position Take Profit’. As on the stop loss this outlines how much we want to make on each trade. For this example, we will use 40pips. The ‘Strategy Take Profit’ will set out how many times we want our strategy to make a profit. In this example we will also use 10 times, so 10 x 40 = 400pips.
12. At the bottom of the manage money screen we have a ‘Trailing Stop’ which will allow you to set a trailing stop loss which means that every time the market moves up by a number of pips you specify, it will set your new stop loss at this level. For this example, we are using 10pips which means that once the market moves 10pips up our stop loss will also move up by 10pips. After setting all of these click save at the bottom of the screen. Each of these will also give you an overall profit and loss on the left-hand side of the screen.
13. After completing our money management, you will be taken back to the strategy overview page and your ‘Algorithm’ is ready to be tested. See Back, Paper test and setting your Trade Live.