Pathshala: Aroon Indicator

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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4JglLbY1KfPylwqPm0Wp7CubXnuT6QhEYQ-1w8wXS66Cwz1TIS66-2cTXYwnW0amGcO5-8Yj6fMP7ygS8ZdtevADeSXXHlhWT2uv_h7iI1kEQUIdh31cLoktTlix9iXYaHEnPYiVLAnM/s1600/Aroon+Indicator.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="111" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj4JglLbY1KfPylwqPm0Wp7CubXnuT6QhEYQ-1w8wXS66Cwz1TIS66-2cTXYwnW0amGcO5-8Yj6fMP7ygS8ZdtevADeSXXHlhWT2uv_h7iI1kEQUIdh31cLoktTlix9iXYaHEnPYiVLAnM/s200/Aroon+Indicator.jpg" width="200" /></a><span style="font-size: small;"><span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon indicator, developed by Tushar Chande in 1995, actually consists of two indicators that together are designed to:</span></span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Identify trend changes or the beginning of a trend</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Identify the existence of a trending or ranging market</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Spot corrective retracements or consolidation periods</span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;">Gauge the strength of a trend</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The
 two Aroon indicators are the Aroon-Up and Aroon-Down, sometimes 
referred to as the bullish Aroon and bearish Aroon. The Aroon-Up 
indicator reflects the number of days since the most recent 25-day high.
 The Aroon-Down indicator shows the number of days since the most recent
 25-day low.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon indicators take rather an inverse stance as compared to the usual momentum oscillators, as the Aroon focus is more on time relative to price rather than price relative to time.</span><br />
<h4 style="text-align: left;">
<span style="font-family: "arial" , "helvetica" , sans-serif;">Calculating Aroon Indicators</span></h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon Indicators are plotted with values ranging from 0 to 100.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon-Up indicator is calculated as follows:</span><br />
<h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;">25 – Number of Days Since Recent 25-day High / 25</span></h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon-Down indicator is calculated as follows:</span><br />
<h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;">25 – Number of Days Since Recent 25-day Low / 25</span></h4>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The results of both calculations are then multiplied by 100 to yield a percentage number.</span><br />
<br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart shows the different modes of the market and how 
      the Aroon indicator reacts to these different market modes:</span><br />
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<h2>
</h2>
<h3>
Understanding what the Aroon Indicator Shows</h3>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">When the Aroon Down indicator (in red above) is above the 70 line and the Aroon 
      Up indicator (in greed above) is below 30, then the market is trending 
    downwards. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">In contrast, when the Aroon Up indicator is above the 70 line and the 
      Aroon Down indicator is below 30, then the market is trending strongly upwards. </span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">When the Aroon Up and Aroon Down indicator move towards the <span style="font-family: "arial" , "helvetica" , sans-serif;">center-line</span> (50), 
      then the market is entering into a consolidation period.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">By varying the period length, the Aroon indicator can give long term 
      indications of trend or short-term indications of trend. By default, the Aroon 
      indicator is 25-periods (shown in the chart above), but a shorter time frame 
      could be 10-periods.</span><br />
<h3>
<span style="font-family: Arial,Helvetica,sans-serif;">The Single Line Aroon Indicator</span></h3>
<span style="font-family: Arial,Helvetica,sans-serif;">Some versions of the Aroon combine the two indicators into a single Aroon indicator that, like other oscillators,
 has values ranging from -100 to +100. In the single indicator version 
of the Aroon, values around the middle zero line indicate the absence of
 a trend, a market that is ranging or in a consolidation phase prior to 
forming a trend. Values above +50 indicate a bullish trend and values 
below -50 indicate a bearish trend. The single version of the Aroon is 
shown in the chart below. Dark blue rectangular boxes are drawn around 
the Aroon indicator line to show where it reaches levels either above 
+50 or below -50. Note how price action, either staying above or falling
 below the uppermost trendline drawn in the main chart window confirms 
the change in direction indicated by the Aroon indicator. Also note the 
additional confirmation of a trend change that comes from the extremely 
high volume levels (shown at the bottom of the main chart window) that 
occur at the peak of the uptrend and the beginning of the sell-off. The 
dotted line in the middle of the Aroon indicator window is the zero 
line.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7eK_oKXkEcOs73SB8RnLXlOPxj2UIWF6vZvImarJoQN7V2MSOIEN6esjiHLJ2D2gSrTtJpuq2SuDDERECOZmJnaXq6Z1TUmND7F_yyOFyZJLjUu5Dhpw8BolFCQdQoIu1QKkMn83-n10/s1600/aroon2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="350" data-original-width="520" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7eK_oKXkEcOs73SB8RnLXlOPxj2UIWF6vZvImarJoQN7V2MSOIEN6esjiHLJ2D2gSrTtJpuq2SuDDERECOZmJnaXq6Z1TUmND7F_yyOFyZJLjUu5Dhpw8BolFCQdQoIu1QKkMn83-n10/s1600/aroon2.png" /></a></div>
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<h3 style="text-align: left;">
Aroon Oscillator</h3>
<span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon Oscillator is calculated by subtracting Aroon Down from 
the Aroon Up indicator. It is interpreted as follows:</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><br />
<ul>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Above 50</b> is considered a <b>strong up-trending market</b></span></li>
<li> <span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Below -50</b> means that the <b>market is trending lower</b>; </span></li>
<li><span style="font-family: "arial" , "helvetica" , sans-serif;"><b>Near 0</b> means that the market is in transition and <b>not trending</b>.</span></li>
</ul>
<span style="font-family: "arial" , "helvetica" , sans-serif;">
    </span><span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below of the contract shows both the Aroon 
      indicator and the Aroon Oscillator:</span><br />
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 <span style="font-family: "arial" , "helvetica" , sans-serif;">The chart below of the contract shows how the Aroon Oscillator is 
interpreted.</span><br />
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<span style="font-family: "arial" , "helvetica" , sans-serif;">A decrease of the Aroon Oscillator from above the 50 line shows that the uptrend 
is consolidating and is reversing direction downward. When the Aroon Oscillator 
hovers around the zero line over time, then the market is in a directionless 
period.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
</span><span style="font-family: "arial" , "helvetica" , sans-serif;">When the oscillator moves toward -50 from the zero line, the market is 
  beginning to trend downward. And when the Aroon Oscillator is below -50, then 
  the market is in a strong downtrend.</span><br />
<br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
</span><span style="font-family: "arial" , "helvetica" , sans-serif;">When the oscillator begins to move upward towards the zero line, the downward 
  trend is slowing down and beginning to reverse direction.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
</span><span style="font-family: "arial" , "helvetica" , sans-serif;">In addition, when the Aroon Oscillator moves higher from the zero line, then 
  the market is moving from a period of non-trending to a period of <span style="font-family: "arial" , "helvetica" , sans-serif;">up-trending</span>.</span><br />
<span style="font-family: "arial" , "helvetica" , sans-serif;">
</span><span style="font-family: "arial" , "helvetica" , sans-serif;">The Aroon indicator and Aroon Oscillator are extremely helpful tools for a 
  trader to have and use; the Aroon indicator helps traders to determine when best 
  to apply trending following indicators like Moving Averages (see: Moving Averages) and when best to use oscillator type 
  technical indicators like <span style="font-family: "arial" , "helvetica" , sans-serif;">Stochastic</span>.</span><br />
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Aroon Indicator 35. Aroon Indicator

The Aroon indicator, developed by Tushar Chande in 1995, actually consists of two indicators that together are designed to: Identify tren...