Aroon Indicator Technical Analysis & Aroon Indicator Signals

Conceived and Engineered by Tushar Chande

This specific stock indicator is employed to ascertain whether a given financial instrument is currently exhibiting a trend or not.

It is also used to reflect how strong the market trend is.

It is also employed to detect and identify the inception of a market trend, hence its nomenclature implying morning or the start of a day.

This stock indicator has 2 lines:

Aroon UP
Aroon DOWN

Aroon UP

The percentage representing the time elapsed from the start of a defined period up to the maximum price level reached by the stock during that specific trading 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 & Aroon UP starts to move down. This means that if Aroon UP stays at 100 then price is making new highs but when it begins to move down then price isn't making new highs.

Conversely, should the equity's price register new troughs for a defined trading period, Aroon UP will register at the zero mark.

Aroon Up- Technical Indicator - Aroon Indicator Analysis in Charts

Calculation

Aroon UP is a percent of time between price period & highest point.

Using ten price periods for the calculation:

Example 1: Highest stock price was 1 day ago

And if the highest price was reached yesterday, - one day prior

10 price times minus 1 day= 9

9/10 in % terms = 90

Aroon UP will be at 90

Example 2: Highest stock price was 5 days ago

If the peak occurred 5 days ago then

10 price periods subtract 5 equals 5

5/10 in % = 50

Aroon UP will be at 50

Aroon DOWN

This specific calculation mirrors that of Aroon UP, but utilizes the lowest data point for its computation instead of the highest.

When a new low is established, the Aroon DOWN indicator reaches 100, and conversely, when a new high is achieved, it will drop to zero.

Aroon Down- Technical Indicator - Aroon Technical Indicator Analysis in Trade Charts

Technical Analysis & Generating Signals

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

Buy Trading Signal & exit signal

Aroon UP surpassing 50 serves as a buy indicator.

If the Aroon UP indicator drops below the 50 threshold, this serves as a defined exit signal for any previously opened long (buy) position.

Sell Signal & exit signal

Aroon DOWN below 50 is a trading sell signal.

An Aroon DOWN moving above the 50 level serves as an exit signal if a sell trade has been initiated in indices.

Aroon Indicator - Aroon Indicator Analysis in Charts - Aroon Indicator MetaTrader 4 Explained

Buy & Sell Trading Signals

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