What is Aroon Indicator?

The term “Aroon” means “the earliest light of the dawn”. The creator chose this nickname because indications are supposed to see when the new trend will start.

The Aroon Indicator closely resembles the Average Directional Index. Moreover, Tushar Chande invented the indicator in 1995. To be more specific, it is used to determine price trend changes in an asset as well as how the trend will perform. It also records the time it takes to rise and the time it takes to fall.

Aroon indicators serve a variety of functions, including identifying consolidations, defining corrective periods, detecting emerging trends, and forecasting price reversals.

Aroon Indicator can provide good entry or exit points at times, but it can also provide incorrect or misleading information. After a big price change has occurred, the buy or sell signal might arrive too late. This happens because the indicator is not predictive and relies on past data. 

As a consequence, rather than relying simply on the Aroon signal, traders should investigate additional technical indicators that corroborate price and volume action in order to trade more efficiently. 

The way to calculate Aroon indicator values:

• AroonUp = 100 * ((X – Number of periods since highest high)/X);
• AroonDown = 100 * ((X – Number of periods since lowest low)/X);

It is important to note that the Aroon indication requires selecting a certain time that is denoted with an "X." A 25-day Aroon-Up indication also counts the number of days since a 25-day high. While a 25-day Aroon-Down indicator counts the number of days since a 25-day low. (These indicators track the frequency of time periods in which a price reached an x-day high or low.)

Aroon indicators are occupied with the relation between price and time, as opposed to other momentum oscillators. 

Furthermore, the Aroon indicator is made up of two parallel lines. An upward line that counts the number of periods since a high, and a downward line that counts the number of periods since a low. When a strong trend arrives it is indicated by higher Aroon values. Nonetheless, a weaker trend is indicated by lower Aroon values.

The values can go anywhere between 0 and 100. A value greater than 50 indicates that a low/high happened within the preceding 12 periods. A number less than 50 implies that it happened inside the 13-period time span.

Aroon can be useful for traders or market researchers because it can grant trading signals such as overlaps between the two Aroon indicators. These are commonly seen as a trend shift or a maker reversal indications.