Aroon Indicator
Developed by Tushar Chande, the Aroon indicator helps indicate if an asset is trending or is in a trading range. Besides that, this technical indicator reveals the beginning of a new trend and its strength. It moves between 0 and 100. Traders can also use this indicator to anticipate changes from trading ranges to trends.
In This Article
What is the Aroon Indicator?
How To Analyse Chart Using the Aroon Indicator
Category
Trend
Type
Lagging
What is The Aroon Indicator?
It is a technical indicator that determines whether a stock is trending. In addition, traders can understand how strong the trend is by using this indicator. In Sanskrit, ‘Aroon’ refers to dawn’s early light.
The Aroon indicator is a combination of Aroon Up and Aroon Down. While the prior measures the time period since the prices have recorded a new high for a specific phase, the latter measures the time since the prices have recorded a new low.
Aroon-Up = [(Period Specified – Periods Since the Highest High within Period Specified) / Period Specified] x 100
Aroon-Down = [(Period Specified – Periods Since the Lowest Low for Period Specified) / Period Specified] x 100
How To Analyse Chart Using the Aroon Indicator
The Aroon indicator is composed of two lines. While the Aroon Up measures the number of periods since a high, the Aroon Down measures the number of periods since a low.
If the up-line crosses above the down-line, it indicates that an uptrend may start. Conversely, a downtrend may be incoming if the down-line crosses above the up-line.
In other words, when the Aroon Up is above the Aroon Down, it indicates bullish price behaviour or a signal for traders to buy. On the other hand, when the Aroon down is above the Aroon Up, it shows a bearish price behaviour and or a signal for traders to sell.
A crossover behind the Aroon Up and Aroon Down generally signals trend changes. This technical indicator moves between zero and 100. When the Aroon Up reaches 100, a new uptrend may have begun. Conversely, when the Aroon Down is 100, it indicates an incoming downtrend.
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