This strategy suits better for stock, indexes and commodities sufficiently volatile but with not so strong trend, where perspective of future quotations are not so certain.
For these financial instruments this system works better than others based on classical trend oscillator (like Supertrend)
This strategy starts from the idea of the creator of Aroon lines,...
There are already several indicators who measure the time behavior relative to price, the most well know being the Aroon indicator published by Tushar Chande. I propose an alternative indicator TPI who tend to create less whipsaw's at the cost of small reactivity.
The TPI is in a range of 0.5/-0.5 and is no different than the Aroon...
Three views of Aroon Indicator - original, binarized and smoothed.
More 'readable' variations of this indicator will help to appreciate its role and integrate into trading strategies more readily.
Note that the smoothed Aroon can be viewed as a channel indicator when normalized to price series.