Technical indicators are great tools for traders to fine tune their trading decisions.
In order to maximize the benefits of indicators, traders need to know which indicators
work best in trending markets and which ones work best in trendless markets. By
using the Aroon indicator can help traders determine when a market is up trending,
down trending, or is in a trendless market. Once you are able to figure out what
the market conditions are, then choosing the right indicator to use becomes much
The Aroon indicator was developed by Tushar Chande in 1995 to determine whether
a stock is currently trending or not and if it was trending how strong the trend
is. Traders can also use the Aroon to identify the beginning of a new trend, consolidations,
spot correction periods and reversals. The indicator is made up of two lines, Aroon-Up
What makes the Aroon Indicator unique among technical indicators is that it analyses
the time versus price on a relative basis. The Aroon-Up line is the amount of time
between the start of a time period and the point at which the highest price during
that period occurred on percentage basis. Conversely, The Aroon-Down is the
amount of time between the start of a time period and the point at which the lowest
price during that period occurred on percentage basis.
If we take a look at these formulas, it is apparent that they are both looking at
how recent the latest highs and lows were in a given period on percentage basis.
Aroon-Up values will show more recent highs and lows, while Aroon-Down will show
less recent highs and lows. The Aroon Indicator fluctuates between 100 and 0. Higher
Aroon numbers suggests a stronger trend and a lower numbers indicate no or weakening