Aroon Indicator Technical Analysis & Aroon Indicator Trading Signals

Created by Tushar Chandes

This stock indicator is used to determine if a instrument is trending or not.

It is also used to indicate how strong the indices trend is.

It is also used to spot the beginning of a trend, the name its name which means morning or dawn.

This stock indicator has two lines:

• Aroon UP
• Aroon DOWN

Aroon UP

Percentage of time between the start of a time period and the highest point that stock price has reached during that period.

If stock price sets a new high, Aroon UP will be 100 - for each new high it will stay at 100. However, if stock price moves down by a certain percentage, then that percentage is subtracted from the 100 and Aroon UP starts to move down. This means that if Aroon UP stays at 100 then price is making new highs but when it starts to move down then price is not making new highs.

If however stock price is making new lows for a particular stock price period then Aroon UP will be at zero

Calculation

Aroon UP is a percentage of time between price period and highest point.

If you use 10 price periods for calculation:

Example 1: Highest stock price was 1 day ago

Then if the highest point was yesterday, i.e. 1 day before then

10 price periods minus 1 day= 9

9/10 in percent terms = 90

Aroon UP will be at 90

Example 2: Highest stock price was 5 days ago

If the highest point was 5 days ago then

10 price periods minus 5 = 5

5/10 in percent = 50

Aroon UP will be at 50

Aroon DOWN

This is calculated the same as Aroon UP but this time using the lowest point instead of highest point.

When a new low is set Aroon DOWN is at 100 and when a new high is set it'll move to zero.

Technical Analysis & Generating Trading Signals

This stock indicator uses the 50% level to measure momentum of the trend.

Buy Indices Signal & exit signal

Aroon UP above 50 is a technical buy trading signal

Aroon UP dipping below 50 is an exit signal if you had opened a buy indices trade.

Sell Indices Signal & exit signal

Aroon DOWN below 50 is a technical sell signal.

Aroon DOWN rising above 50 is an exit signal if you had opened a sell indices trade.

Buy & Sell Trading Signals