Aroon Indicator
The Aroon indicator, developed by Tushar Chande in 1995, measures how long it has been since a security made a new high or new low over a chosen period. It plots two lines — Aroon Up and Aroon Down — both ranging from 0 to 100. The crossover between these lines is a classic trend-change signal that Indian traders rely on for early entries.
Key takeaways:
- Aroon Up = 100 × (period − periods since N-period high) ÷ period.
- Aroon Down = 100 × (period − periods since N-period low) ÷ period.
- Default period is 25; common alternatives include 14 and 9.
- Aroon Up crossing above Aroon Down suggests a new uptrend.
- Both lines below 50 = consolidation; both above 70 = strong trend.
How Aroon works
The indicator answers a simple question: how recently did this stock make a new high or low over the last N periods? If the high was made today, Aroon Up = 100; if it was 25 periods ago (out of 25), Aroon Up = 0. The same logic applies to lows for Aroon Down. Strong, recent highs in either direction signal an active trend.
Signals to look for
- Bullish crossover: Aroon Up crosses above Aroon Down — new uptrend candidate.
- Bearish crossover: Aroon Down crosses above Aroon Up — possible downtrend start.
- Aroon Up at 100, Aroon Down near 0: Stock making frequent new highs — strong uptrend.
- Both lines below 50: Sideways consolidation; trend strategies are unreliable.
Aroon Oscillator
The Aroon Oscillator is simply Aroon Up minus Aroon Down. It ranges from −100 to +100. Crossing zero is equivalent to the Aroon line crossover. Many platforms plot it as a single line for easier reading.
Worked example on Nifty
If Nifty makes a new 25-day high today, Aroon Up = 100. If the 25-day low was, say, 10 sessions ago, Aroon Down = 60. The Up line is well above Down — a confirmed uptrend. Pullbacks during such phases are buying opportunities until Aroon Up falls below 70.
Limitations
- Aroon can give late signals in fast-moving markets.
- It works poorly in choppy markets where new highs and lows alternate.
- Default 25 may be too slow for intraday; experiment with 9 or 14.
Combining Aroon with other tools
Pair Aroon with ADX to confirm trend strength. Use moving averages to filter trade direction. On daily charts, Aroon + ADX + price-action gives a robust framework for catching early-stage trend trades.
Frequently asked questions
Is the Aroon indicator a leading indicator?
Partially — it identifies new highs/lows quickly but still lags pure price action.
Default period of 25 — is that fixed?
No. Use 9–14 for intraday, 25 for daily swing, 50+ for weekly trends.
Does Aroon work on commodities?
Yes — Chande designed it generically; it works wherever price data exists.
Can I use the Aroon Oscillator alone?
It is best used with other tools. Aroon signals during ranging markets are unreliable.
