What Is an Aroon Indicator?
An Aroon indicator is a technical analysis tool used to measure the strength of a trend. It was developed by Tushar Chande in 1995 and consists of two lines, an Aroon Up line and an Aroon Down line. The Aroon Up line measures the number of periods since price has made a new high while the Aroon Down line measures the number of periods since price has made a new low. When both lines are above 50 it indicates that there is strong upward momentum in prices, whereas when both lines are below 50 it suggests downward momentum.
The main purpose of using this indicator is to identify potential changes in trends before they occur so traders can take advantage of them. For example, if the Aroon Up line crosses above 70 then it could be interpreted as bullish signal indicating that prices may soon start rising again after being range-bound for some time. Similarly, if the Aroon Down line crosses below 30 then it could be seen as bearish signal suggesting that prices may soon start falling again after having been trending upwards for some time.
How to Calculate Aroon Indicator Values?
The Aroon indicator is a technical analysis tool used to measure the strength of a trend. It consists of two lines, an Aroon Up line and an Aroon Down line. The values for these lines are calculated by taking the number of days since price has made a new high or low over a given period (typically 25 periods) and dividing it by the total number of periods in that time frame.
To calculate the value for each line, first determine how many days have passed since prices reached their highest point within your chosen time frame (the “high”). Then divide this figure by the total number of trading days in that same period (25). This will give you your Aroon Up value. To get your Aroon Down value, do the same calculation but with respect to when prices hit their lowest point during that same timeframe instead. Finally, subtract one from another to obtain your overall Aroon Indicator Value which can range between -100 and +100; higher numbers indicate stronger trends while lower numbers suggest weaker ones.