The Aroon indicator invented by Tushar Chande in 1995 measures the strength and direction of the trend of a market.
The indicator is studied in the books "The New Technical Trader: Boost Your Profit by Plugging Into the Latest Indicators" and "Beyond Technical Analysis: How to Develop and Implement a Winning Trading System"
The Aroon indicator consists of:
- Aroon up: upward curve measuring the force of bulls or buyers, calculated on the highest and the number of periods since the last highest
- Aroon down: irregular curve measuring the force of bears or sellers, calculated on the lower and the number periods since the last lowest.
Calculation Formula From
This system indicators consists of two lines, Aroon (up) and Aroon (down) varying from 0 to 100. The calculations are made for a given period of time.
Aroon (up) represents percentage of time that has elapsed from the above that period.
- Aroon UP
bullish indicator = [(N periods - N periods from the highest maximum / N periods] * 100
Aroon (down) represents percentage of time that has elapsed since the lower this period.
- Aroon Down
bearish indicator = [(N periods - N periods from the lowest minimum) / N periods] * 100
Interpretation Signals and rules Of Trading
the indicator oscillates between 0 and 100.
- higher readings at 70 are considered strong:
strong trend - Lower readings at 30 are considered low.
- The area between levels 30 and 70 represents a flat area, not trader (no trend)
- Buy signal
. The curve Aroon Up is above the curve Aroon Down - Trend bullish
. The curve Aroon Up is above level 70 - Trend bullish
- sell signal
. The curve Aroon Down is above the curve Aroon Up - Trend bearish
. The curve Aroon Down is above level 70 - Trend bearish
Analysis Trading
Trade - Example
Exchange
Action GDF SUEZ Trading | GSZ
Time Frame: 4 hours - H4 - The area between levels 30 and 70 represents a flat area, not trader (no trend) - Buy signal . The curve Aroon Up is above the curve Aroon Down - Trend bullish . The curve Aroon Up is above level 70 - Trend bullish - sell signal . The curve Aroon Down is above the curve Aroon Up - Trend bearish . The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4 - The area between levels 30 and 70 represents a flat area, not trader (no trend) - Buy signal . The curve Aroon Up is above the curve Aroon Down - Trend bullish . The curve Aroon Up is above level 70 - Trend bullish - sell signal . The curve Aroon Down is above the curve Aroon Up - Trend bearish . The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4 The curve Aroon Up is above the curve Aroon Down - Trend bullish . The curve Aroon Up is above level 70 - Trend bullish - sell signal . The curve Aroon Down is above the curve Aroon Up - Trend bearish . The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4 The curve Aroon Up is above the curve Aroon Down - Trend bullish . The curve Aroon Up is above level 70 - Trend bullish - sell signal . The curve Aroon Down is above the curve Aroon Up - Trend bearish . The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4 The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4 The curve Aroon Down is above level 70 - Trend bearish Analysis Trading Trade - Example Exchange Action GDF SUEZ Trading | GSZ Time Frame: 4 hours - H4
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