Aroon Indicator, developed by Tushar Chande, is a trend indicator consisting of Aroon Up and Aroon Down lines. "Aroon" means "dawn's early light" in Sanskrit; the indicator identifies trend beginning and strength by measuring time since highest and lowest prices.
Aroon Up = [(N - Periods since N-period high) / N] × 100 Aroon Down = [(N - Periods since N-period low) / N] × 100 Standard period: N = 25 Range: 0 to 100 Aroon Oscillator = Aroon Up - Aroon Down Range: -100 to +100
Standard Aroon (25 periods): Most commonly used
Short-term Aroon (14 periods): More sensitive, suitable for short-term trading
Long-term Aroon (50 periods): Smoother, suitable for long-term trend analysis
Aroon Oscillator: Single line display, positive values indicate uptrend, negative indicate downtrend
Aroon Up = 100: Just made new high, strong uptrend
Aroon Down = 100: Just made new low, strong downtrend
Aroon Up > 70 and Aroon Down < 30: Strong uptrend
Aroon Down > 70 and Aroon Up < 30: Strong downtrend
Aroon Up Crosses Above Aroon Down: Trend may turn bullish, buy signal
Aroon Down Crosses Above Aroon Up: Trend may turn bearish, sell signal
Both Lines Below 50: Consolidation state, no clear trend
Lines Moving Parallel: Stable trend
Aroon Indicator is best used for identifying beginning of new trends. When Aroon Up reaches 100, indicates just made new high, possible start of uptrend. Unlike ADX, Aroon focuses on time factor rather than price movement magnitude. In consolidating markets, both Aroon lines fluctuate below 50. Many traders combine Aroon with other trend indicators, entering when Aroon shows new trend beginning. Aroon Oscillator provides more intuitive display of trend direction and strength.
Identifies beginning of new trends, unique perspective based on time factor, provides trend strength information, applicable to all markets and timeframes, can identify consolidation states
Prone to false signals in ranging markets, doesn't provide overbought/oversold information, requires combination with other indicators, significant lag
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