AROON Up/Down Indicator

What

The Aroon is a trending indicator used to measure if a security is in a trend and the magnitude of that trend. The indicator can also be used to identify when a new trend is set to begin.

The indicator is comprised of two lines, an Aroon-up line and an Aroon-down line.

The Aroon-up line measures the amount of time it has been since the highest price during the time period. The Aroon-down line, on the other hand, measures the amount of time since the lowest price during the time period.

How

If a 100 period timeframe is used and it has been 25 periods since the highest price in the last 100 days the Aroon up value would currently be set at 75. If it has been 80 periods since the lowest period the Aroon down would be 20. The numbers computed for each of the up and down are then plotted as a line on the Aroon indicator between a range of zero and 100.

                                (number of periods – number of periods since highest price)

Aroon UP =          _____________________________________________________  x 100

                                                        number of periods

                                (number of periods – number of periods since lowest price)

Aroon DOWN =     ____________________________________________________   x 100

                                                       number of periods

When

In general, the security is considered to be in an uptrend when the Aroon-up line is above 70 along with being above the Aroon-down line.

The security is in a downtrend when the Aroon-down line is above 70 and also above the Aroon-up line.

The trend is considered to be in a consolidation pattern when the two lines are near each other in between 70 and 30.