Aroon Stock Indices Indicator Technical Analysis and Aroon Stock Indices Indicator Signals

Developed by Tushar Chande

This indices technical indicator is used to determine if a trading instrument is trending or not.

It is also used to indicate how strong the stock indices trend is.

It is also used to identify the beginning of a trend, the name its name which means morning or dawn.

This indices technical indicator has two lines:

• Aroon UP Indicator
• Aroon DOWN Indicator

Aroon UP Indicator

Percentage of time between the start of a time period and the highest point that stock index price has reached during that period.

If stock index price sets a new high, Aroon UP Indicator will be 100 - for each new high it will stay at 100. However, if stock index price moves down by a certain percentage, then that percentage is subtracted from the 100 and Aroon UP Indicator starts to move down. This means that if Aroon UP Indicator stays at 100 then stock index price is making new highs but when it starts to move down then stock index price is not making new highs.

If however stock index price is making new lows for a particular stock index price period then Aroon UP Indicator will be at zero

Calculation

Aroon UP Indicator is a percentage of time between stock index price period and highest point.

If you use 10 stock index price periods for calculation:

Example 1: Highest stock index price was 1 day ago

Then if the highest point was yesterday, i.e. 1 day before then

10 stock index price periods minus 1 day= 9

9/10 in percent terms = 90

Aroon UP Indicator will be at 90

Example 2: Highest stock index price was 5 days ago

If the highest point was 5 days ago then

10 stock index price periods minus 5 = 5

5/10 in percent = 50

Aroon UP Indicator will be at 50

Aroon DOWN Indicator

This is calculated the same as Aroon UP Indicator but this time using the lowest point instead of the highest point.

When a new low is set Aroon DOWN Indicator is at 100 and when a new high is set it will move to zero.

Stock Indices Technical Analysis and Generating Stock Indices Signals

This indices technical indicator uses the 50 % level to measure momentum of the trend.

Buy Stock Indices Signal and exit signal

Aroon UP Indicator above 50 is a technical buy stock indices signal

Aroon UP Indicator dipping below 50 is an exit signal if you had opened a buy stock indices trade.

Sell Stock Indices Signal and exit signal

Aroon DOWN Indicator below 50 is a technical sell stock indices signal.

Aroon DOWN Indicator rising above 50 is an exit signal if you had opened a sell stock indices trade.

Buy and Sell Stock Indices Signals