Description
Aroon is a technical analysis indicator that was developed by Tushar Chande in 1995. Aroon is a sanskrit word meaning dawn's early light, and the Aroon indicator is so named because it it is designed to signal the beginning of a new trend. Aroon consists of two lines (known as Aroon up and down) which oscillate between 0 and 100 (usually in opposite directions). Aroon is displayed on its own chart separate from the price bars, and is the lower section of the example chart.
Calculation
- Description: Aroon up (AU) is calculated as the number of bars that have elapsed since the most recent highest high (HB), and Aroon down (AD) is calculated as the number of bars that have elapsed since the most recent lowest low (LB), as a reverse percentage of the total number of bars (X).
- Calculation:
AU = ((X - HB) / X) x 100
AD = ((X - LB) / X) x 100
If the total number of bars is 10, and the most recent bar is the highest high, Aroon up would be calculated as follows:<br> AU = ((10 - 0) / 10) x 100 = 100
Trading Use
Aroon is most often used to indicate the start of a new trend (i.e. a change of direction), and as an indication of the strength of the current trend. A new trend is indicated by the Aroon up and down lines crossing over each other. The strength of the current trend is indicated by the Aroon up and/or down lines being at or near 100 (which shows that the most recent bars have made new highs or lows).
