Aroon Indicator

The Aroon Indicator, developed by Tushar Chande in 1995, is a technical analysis tool designed to identify whether a security is trending and how strong that trend is. The name "Aroon" is derived from Sanskrit, meaning "dawn's early light," reflecting the indicator's purpose of detecting the beginning of a new trend. It consists of two lines: Aroon Up measures the number of periods since the most recent high (expressed as a percentage of the lookback period), while Aroon Down measures periods since the most recent low. Both lines oscillate between 0 and 100. When Aroon Up is above 70 and Aroon Down is below 30, a strong uptrend is likely in place. Conversely, when Aroon Down is above 70 and Aroon Up is below 30, a strong downtrend is indicated. A crossover of Aroon Up above Aroon Down signals a potential shift from bearish to bullish, and vice versa. When both lines are below 50, it suggests a consolidation or range-bound phase. The default lookback period is typically 25 periods. Unlike momentum oscillators that focus on the magnitude of price changes, the Aroon Indicator focuses on the timing of highs and lows, offering a unique perspective on trend development.