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Aroon Indicator Tutorial

The Aroon indicator measures the time since the highest and lowest prices in a given period, expressed as a percentage, with Aroon (up) indicating uptrends and Aroon (down) indicating downtrends. The Aroon Oscillator, calculated by subtracting Aroon (down) from Aroon (up), helps identify trend strength and potential buy or sell signals based on its movement around the zero line. Values above 70 indicate strong trends, while values below 50 suggest weakening trends.

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86 views3 pages

Aroon Indicator Tutorial

The Aroon indicator measures the time since the highest and lowest prices in a given period, expressed as a percentage, with Aroon (up) indicating uptrends and Aroon (down) indicating downtrends. The Aroon Oscillator, calculated by subtracting Aroon (down) from Aroon (up), helps identify trend strength and potential buy or sell signals based on its movement around the zero line. Values above 70 indicate strong trends, while values below 50 suggest weakening trends.

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mcxnifty716
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© © All Rights Reserved
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Technical Analysis, Signals and Trading Systems

Aroon Indicator
Basically, the Aroon indicator represents the time (number of bars or periods) from the
beginning of the analyzed period to the bar at which the highest price for Aroon (up) or the
lowest price for Aroon (down) occurred as a percentage of the total duration of the analyzed
period.

From the Aroon formulas, we can see that whenever a stock closes at a new high, the Aroon
(up) will be equal to 100%, while the Aroon (down) will tend to zero. Conversely, whenever
the stock closes at a new low, the Aroon (down) will be 100% while the Aroon (up) will tend
to zero.
Chart 1: Aroon Indicator

Aroon Oscillator
The Aroon Oscillator is calculated simply by subtracting Aroon(down) from Aroon(up).
Because Aroon lines move in a range between 0 and 100, the Aroon Oscillator oscillates
around the zero center line between -100 and +100.
Chart 1: Aroon Oscillator

Interpretation
The Aroon lines and Aroon oscillator are used in technical analysis to determine the strength
of the current trend.

A high above 70, Aroon (up), indicates a strong uptrend, whereas a high, above 70, Aroon
(down), indicates a strong downtrend. At the same time, Aroon values below 50 would
indicate a weakening of the trend. Furthermore, when the Aroon oscillator crosses the zero
line, you could consider buying (if the oscillator moves up) or selling (if the oscillator moves
down).

The Aroon indicator calculations are based on the bar closing price and can be used in
a trading system as a price-based valuation of trend strength.
Aroon Formula and Calculations
Aroon Indicator
The Aroon indicator is represented by two lines - "Aroon (up)" and "Aroon (down)" - which
oscillate between 0 and 100 (see the NASDAQ 100 Index chart above).

The Aroon (up) is calculated by means of the following formula:

Aroon Up = [(# of periods) - (# of periods since the highest high during that time)] / #
of periods x 100

The Aroon (down) formula is calculated as follows:

Aroon Down = [(# of periods) - (# of periods since the lowest low during that time)] / #
of periods x 100

For instance, by calculating the 14-period Aroon (up) and Aroon (down) lines on a daily
chart:

If the highest price for the past 14 periods (bars or days) was reached 6 periods (bars or
days) ago, then the Aroon (up) would be (14-6) / 14 x 100 = 57.

Similarly, if, within the same period of 14 days (14 bars), the lowest price was reached on the
previous bar (1 day ago) then the Aroon (down) would be (14-1) / 14 x 100 = 93
Aroon Oscillator
The Aroon Oscillator is calculated simply by subtracting Aroon(down) from Aroon(up)

Aroon Oscillator = Aroon(up) - Aroon(down)

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