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Created by Tushar Chande in 1995. This indicator can help you to see when trends emerge or be warned of the likelyhood reversals are going to happen.
It consits of two parts. The Aroon Up and the Aroon Down line. Each oscillating between 0 and 100, which represents a percentage. And each indicating if an up or a down trend is building. The Aroon-Up is made of price highs and Aroon-Down is made of price lows. With the default number of periods set to 25 days the highs and lows are calculated over.
As soon as there is a new 25 day high, the Aroon-Up will head up towards 100. And as soon as there is a new 25 day low, the Aroon-Down will shoot up towards 100.
This indicator is a lot like to the directional movement index (DMI), which is also a well known indicator used to measure the strength of a given trend.
You can identify buying pressure, a bullish signal, when the Aroon-Up is above 50 and the Aroon-Down is below 50.
You can identify selling pressure, a bearish signal, when the Aroon-Down is above 50 and the Aroon-Up is below 50.
An emerging trend can be confirmed if one of the Aroons is up and the other one is decreasing.
A period of a sideways market is indicated by both Aroons trending below 50 and/or both are moving in the same manner.
Aroon-Up = ((25 - Days Since 25-day High)/25) x 100
Aroon-Down = ((25 - Days Since 25-day Low)/25) x 100
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