The use of indicator Arun

Arun indicator is supposed to allow you to expect changes in the market of the development trend to trade in that range. At first glance, the indicator looks very complicated and does not seem to make sense. After some time to study it in details, I found that it is more helpful than it seems at first.

The indicator measures the number of periods that have elapsed since the last maximum and minimum for a certain number of periods. Therefore, the indicator Arun consists of two parts: one measures the number of periods, starting from the last peak (Arun top) and the other measures the number of periods, starting from the last minimum (Arun downstream). (For more information, see "Indicator Arun" at number 31)

We, as traders, it is extremely important to know how to use the indicators in their own interests. I worked with Arun indicator for several months, and I think found a way to use that and want to share with you.

As you can see below, Arun indicator consists of two lines. One red (line up), and one blue (line down). In the description of the system is a discussion on three levels. These levels are set at 70%, 50% and 30%. I found that if to pay attention, especially in relation to the red line level, we can determine that the market reports on the trend. From this it becomes clear how one can use this indicator to trade. In fact, you can automatically create a virtually complete system based on the indicator.

Rule 1: If the red line goes to the top of the range (window), then it is possible to start the trend. If a rising red line is basically between the top of the window (100) and the level of 70, marked by the orange line in the example above, the upward trend is in development. The closer it is to the top, the stronger the trend.
Rule 2: If the red line is rising and recovering breaks through 50% of the first level (red dashed line), the trend has serious problems. If it reaches the bottom of the scale / window, the upward trend has ended and may actually begin descending trend.
Rule 3: If the red and blue lines are separated from each other and stay apart, the trend is strong, and there is an opportunity to build positions in the emerging recoil.

So what we have: there is a strong trend upwards if the red line goes to the top and stays there, the trend is the problem if the line is receding to 50% of th level, and can turn the trend down, if it falls below the 30% level . The same, just the opposite will be true for the downward trend. If the blue line breaks up through 50% of the first level, the descending trend of diminishing, etc.

So how can we deal with this indicator? I found that if I just watch the ratio between red and blue lines, I can use them as an intersection of input and output signals. Look at the schedule below, which are marked by arrows points to enter the market. This is the real deal, who worked in accordance with the description. You can see that red line rises to the top immediately after opening the way across the blue line. This intersection of the blue line, and signaled the entrance to a long position. Then, the red line is generally above 70% level and the price continues to rise. Please note, as red and blue lines are separated during most of the movement. This indicates the development of a strong trend, and points to the opportunity to build positions in the kickbacks.

When the Red Line violates the 50% first level down, you can record profits if you sell a few lots, and completely close the position, if you sell only one lot. In the above example, you can see that the red line again crosses the blue line, moving to the bottom of the window. You can open a short position at the crossroads. As long as the red line is below the 50% level, you can hold a short position.

You can add something to help with input and management of transactions. Look at the example below, and you will see that I put on a schedule automatic trend lines. If you trade multiple lots, you can use the trend line to close the portion of the positions when the price rose on the other trend lines, and turn the other way when the red line indicator Arun crossed the blue line, which usually occurs immediately after a breakthrough price trendline. Of course, you can turn, receives a signal from breakthrough trend line, but I recommend to wait for confirmation from Arun indicator for opening positions in the other direction, as well as the probability of a false break or a quick turn without such confirmation is growing.

I added some options to display Arun. Basic installation is shown in the following window. As you can see, it is possible to specify the installation of above and below for the red line, thus forcing it to be green when it is above the blue line and red when it is below it. (see second box below) This makes it easier to manage your positions. You can simply hold long positions when the line is green and short, when it is red.

When the market fluctuates, it is better to stay out of the market. Look, when the price bars arranged in a horizontal line, a line indicator is often overlap between them. You should avoid these markets with the Arun. Under such conditions, the indicator Arun becomes helpless in front of a fast turn. There are many methods for determining the volatile market. The "medium-sized bar is a good way to identify and avoid such states.

When the market is moving normally, the proposed system catches all winning transactions and reduce losing fast enough, by the operation of the indicator Arun and pricing activity around the trend lines. Indicator Arun will work with any time scales, but the parameters should be chosen specifically for each time scale. Try it and see whether you like it how it works. I hope that this article will help alleviate some issues related to the use of this wonderful indicator.

Forex Magazine
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