what is the aroon indicator 
the aroon indicator is a technical indicator that can identify trend changes in the price of an asset as well as that trend s strength the aroon indicator essentially measures the time between highs and the times between lows over various periods strong uptrends will regularly see new highs and strong downtrends will regularly see new lows the indicator consists of the aroonup line and the aroondown line the aroon indicator was developed by tushar chande 1formula and how to calculate the aroon indicatoraroon up 25 periods since 25 period high25 100aroon down 25 periods since 25 period low25 100 begin aligned text aroon up frac 25 text periods since 25 period high 25 ast100 text aroon down frac 25 text periods since 25 period low 25 ast100 end aligned aroon uparoon down 2525 periods since 25 period high 100 2525 periods since 25 period low 100 the aroon calculation requires the tracking of the high and low prices typically over 25 periods understanding the aroon indicatorthe aroon indicator was created by tushar chande in 1995 21 it is used by technical analysts to identify how strong asset price trends are as well as any changes in asset prices the main assumption underlying this indicator is that a stock s price will close regularly at new highs during an uptrend and regularly make new lows in a downtrend this is primarily shown through an up line and a down line the aroonup and the aroondown measure the strength of the uptrend and the strength of the downtrend respectively these lines fluctuate between zero and 100 values close to 100 indicate a strong trend and values near zero indicate a weak trend where the lower the aroonup the weaker the uptrend and the stronger the downtrend and vice versa the indicator focuses on the last 25 periods but is scaled to zero and 100 therefore an aroonup reading above 50 means the price made a new high within the last 12 5 periods a reading near 100 means a high was seen very recently the same concepts apply to the aroondown when it is above 50 a low was witnessed within the 12 5 periods an aroondown reading near 100 means a low was seen very recently crossovers can signal entry or exit points up crossing above down can be a signal to buy down crossing below up may be a signal to sell when both indicators are below 50 it can signal that the price is consolidating new highs or lows are not being created traders can watch for breakouts as well as the next aroon crossover to signal which direction the price is going limitations of using the aroon indicatorthe aroon indicator may signal a good entry or exit point in other cases it will provide poor or false signals the buy or sell signal may occur too late after a substantial price move has already occurred this happens because the indicator looks backward and isn t predictive a crossover may look good on the indicator but that doesn t mean the price will necessarily make a big move the indicator isn t factoring the size of moves it only cares about the number of days since a high or low even if the price is relatively flat crossovers will occur as eventually a new high or low will be made within the last 25 periods traders still need to use price analysis and potentially other indicators to make informed trading decisions relying solely on one indicator isn t advised aroon indicator vs directional movement index dmi the aroon indicator is similar to the directional movement index dmi which was developed by j welles wilder in 1978 3 this is also a technical indicator that uses up and down lines to show the direction of a trend the main difference between these two indicators is that the aroon indicator formulas are primarily focused on the amount of time between highs and lows the dmi on the other hand measures the price difference between the current highs lows and prior highs lows therefore the main factor in the dmi is the price rather than time example of how to use the aroon indicatorthe following chart shows an example of the aroon indicator and how it can be interpreted the chart shows there is both the aroon indicator and an oscillator that combines both lines into a single reading of between 100 and 100 the crossover of the aroonup and aroondown indicates a reversal in the trend while the index was trending before the reversal the aroondown remained very low this suggests that the index had a bullish bias despite the rally on the far right the aroon indicator hasn t shown a bullish bias yet this is because the price rebounded so quickly that it hasn t made a new high in the last 25 periods at the time of the screenshot despite the rally 