The Aroon Indicator

The Aroon Indicator  is used to know when there is an Uptrend, Downtrend or Sideways Trend in the Prices and how strong the trend is. Knowing the Trend of the Prices is very important and useful, because you can better understand the signals from the Patterns of the Technical Analysis or the Candlestick Patterns.

General Features of the Aroon Indicator

– The standard Period for the Aroon is 25 days, while for the short-term Period is 10 days.

– The Aroon is composed by two lines: 1) Aroon Up (Green line): it measures the strength of an Uptrend; 2) Aroon Down (Red line): it measures the strength of a Downtrend.

– The Aroon can oscillate between 0 and 100; when the value of the Aroon is between 0 and 30 it’s a signal of a decline in the Prices, while when the value of the Aroon is between 70 and 100 it’s a signal of a rise in the Prices. The value of the centerline in 50.

How to interpret the Signals of the Aroon Indicator

– When the Aroon Up is above the value of 50 while the Aroon Down is below the value of 50, it’s a signal of a rise in the prices; whereas when the Aroon Up is below the value of 50 while the Aroon Down is above the value of 50, it’s a signal of a decline in the prices.

– When the Aroon up breaks above (Goes from below to above) the Aroon Down, it’s a signal of a possible Bullish reversal. Whereas when the Aroon Up breaks below (Goes from above to below) the Aroon Down, it’s a signal of a possible Bearish reversal.

– There is a phase of “congestion” in the Prices when the Aroon Up and Aroon Down move in a parallel and “confused” way.

– When the Aroon Down is above the value of 70, while the Aroon Up is below the value of 30, the current Trend in the Prices is a Downtrend. Whereas, when the Aroon Up is above the value of 70 while the Aroon Down is below the value of 30, the current Trend in the Prices is an Uptrend.