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Aroon indicator
Aroon indicator is constructed on the calculation of periods number, those that have passed from the moment of maximum and minimum within the time range of periods. It lets determine prices fluctuations from the market trend state to the sidewalks state and demonstrates lack of clear tendencies.
The Aroon indicator is used to define if a currency-trading price is following a trend or sideways and to measure the trend's strength. If the currency's trading price is going up, the end for this period will be closer, and on the contrary. The Aroon indicator shows in percents how much time passed between the up (highest) and down (lowest) close starting from the beginning of a period.
When "Aroon up" and "Aroon down" are moving simultaneously, there is no clear trend. Either the price is moving sideways or it is going to move sideways. When the "Aroon down" is less than 50 it is a sign that the downtrend is giving up its momentum, while when the Aroon (up) is less than 50, it is a sign that the uptrend is giving up its momentum. When the "Aroon up" or "Aroon down" are more than 70, it demonstrates a strong trend in the same direction, while when the value is less than 30; it means a trend going in an opposite direction.
Finally, for the Aroon Oscillator, the positive value shows a coming or an upward trend, and the negative value indicates a downward trend. When the absolute value of an oscillator becomes higher, an indication of a trend is also getting stronger.
What's in-depth analysis?
The developer of The Aroon was Tushar Chande who created it in the mid-90s. This trend indicator helps to define if the security is moving in a trend direction or sideways and if the trend is strong. The close for the period will be closer to the end of the period if the price of a security is going up, and on the contrary. The Aroon indicator displays in percentages what period of time has passed between the "up" (highest) and "down"(lowest) close, since the start of the period.
How to use the indicator?
While "Aroon up" and "Aroon down" are changing simultaneously, the trend is not clear. The price then moves sideways, or is going to move sideways. When "the Aroon up" is under 50, it is a signal that the uptrend is giving up its momentum. In addition, when "the Aroon down" is under 50, it is a signal that the downtrend is giving up its momentum. When "the Aroon up" or "Aroon down" exceed 70, it is a signal of a strong trend in the same direction. In addition, when the value is under 30, it shows a moving in the contrary direction. In the end, the positive value of the Aroon Oscillator demonstrates the coming trend (or an upward trend) and the negative value demonstrates a downward trend. The indication of a trend gets stronger if the absolute value goes higher.
How to calculate the indicator?
The formula consisting of two lines, “Aroon up" and "Aroon down," is used for calculating the Aroon indicator. The Aroon Oscillator in the result is the distinction between them.
The formulas are as follows:
"Aroon up" = sum number of periods – number of periods since the highest close / sum number of periods x 100
"Aroon down" = sum number of periods – number of periods since the lowest close / total number of periods x 100
Aroon oscillator = "Aroon up" - "Aroon down"
Usage
When Aroon (up) and Aroon (down) are moving together, there is no clear trend (the price is moving sideways, or about to move sideways).
When the Aroon (up) is below 50, it is an indication that the uptrend is losing its momentum, while when the Aroon (down) is below 50; it is an indication that the downtrend is losing its momentum.
When the Aroon (up) or Aroon (down) are above 70, it indicate a strong trend in the same direction, while when the value is below 30, it indicates a trend coming in an opposite direction.
Finally, for the Aroon Oscillator, the positive value indicates an upward trend (or coming trend), and the negative value indicates a downward trend. The higher the absolute value of an oscillator, the stronger is an indication of a trend.