Aroon Indicator

Overview

The Aroon indicator was developed by Tushar Chande.  Aroon is Sanskrit word
“dawn’s early light” or the change from night to day.  The Aroon indicator allows you
to anticipate changes in security prices from trending to trading range.  For more
information on the Aroon indicator see the article written by Tushar Chande in the
September 1995 issue of Technical Analysis of Stocks and Commodities.

These changes are anticipated by measuring the number of periods that have passed
since the most recent x-period high and x-period low.  Therefore, the Aroon indicator
consists of two plots; one measuring the number of periods since the most recent x-
period high (Aroon Up) and the other measuring the number of periods since the most
recent x-period low (Aroon Down). The actual plotted value is a “stochastic” like
scale (see Stochastic Oscillator) ranging from 0 to 100.  Assuming a default time-
period of 14 days, if a security makes a new 14-day high, the Aroon Up = 100; when
the security makes a new 14-day low, the Aroon Down = 100. When the security has
not made a new high for 14 days, the Aroon Down = 0; when the security has not
made a new low for 14 days, the Aroon Down = 0.

The age-old problem for many trading systems is their inability to determine if a
trending or trading range market is at hand.  Trend-following indicators such as
MACD and moving averages, tend to be whipsawed as markets enter a non-trending
congestion phase.  On the other hand, overbought/oversold oscillators (which work
well during trading range markets) tend to overreact to price pull-backs during
trending markets—thereby closing a position prematurely.  The Aroon indicator
attempts to remedy this by helping you determine when trend-following or
overbought/oversold indicators are likely to succeed.

Aroon Indicator is one of the new indicators of Metastock 6.0 or later versions .The
Formula of Aroon Indicator consists of several complex formulas as follows :

Formula

The Aroon down:

100* (14 - (( If(Ref(L,-1) = LLV( L ,14 ) ,1 , If( Ref(L ,-2 ) = LLV( L,14 ) ,2 , If( Ref(L ,- 3 ) =
LLV( L,14 ) ,3 ,If( Ref(L ,-4 ) = LLV( L ,14 ) ,4 ,If(Ref( L ,-5 ) = LLV( L ,14 ) ,5 ,If(Ref(L ,-6 ) =
LLV( L,14 ) ,6 ,If( Ref(L ,-7 ) = LLV( L,14 ) ,7 ,If(Ref( L ,-8 ) = LLV( L ,14 ) ,8 ,If(Ref( L ,-9 ) =
LLV( L,14 ) ,9 ,If( Ref(L,-10) = LLV(L,14 ) ,10 ,If(Ref(L ,-11) = LLV( L,14 ) ,11 ,If(Ref(L,-12) =
LLV(L ,14) ,12,If( Ref(L,-13) = LLV(L ,14 ) ,13 ,If( Ref( L,-14) = LLV( L,14 ) ,14 ,0) ) ) ) ) ) ) ) ) )
) ) ) ) ) ) ) / 14
The Aroon up:

100 * ( 14 - ( ( If(Ref(H ,-1) = HHV(H ,14 ) ,1 ,If(Ref(H ,-2 ) = HHV(H ,14 ) ,2 ,If(Ref(H ,- 3 ) =
HHV(H ,14 ) ,3, If(Ref(H ,-4 ) = HHV(H ,14 ) ,4 ,If(Ref(H ,-5 ) = HHV(H ,14 ) ,5 ,If(Ref(H ,-6 ) =
HHV(H ,14 ) ,6 ,If(Ref(H,-7 ) = HHV(H ,14 ) ,7 ,If(Ref(H ,-8 ) = HHV(H ,14) ,8 , If(Ref(H ,-9 ) =
HHV(H ,14) ,9 ,If(Ref(H ,-10 ) = HHV(H ,14 ) ,10 ,If(Ref(H ,-11 ) = HHV(H ,14) ,11 ,If(Ref(H ,-
12 ) = HHV(H ,14) ,12 ,If(Ref(H ,-13) = HHV(H ,14 ) ,13 ,If(Ref(H ,-14 ) = HHV(H ,14 ) ,14 ,
0 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) / 14

The Aroon Oscillator = Aroon up - Aroon down.

** The UP and DOWN Aroon indicators are to be plotted in the same inner-window.

Interpretation:

There are basically three conditions that you look for when interpreting the Aroon
indicator:  extremes at 0 and 100, parallel movement between Aroon Up and Aroon
Down, and crossovers between Aroon Up and Aroon Down.

Extremes. When the Aroon Up line reaches 100, strength is indicated.  If the Aroon
Up remains persistently between 70 and 100 a new uptrend is indicated.  Likewise if
the Aroon Down line reaches 0, potential weakness is indicated. If the Aroon Down
remains persistently between 0 and 30 a new downtrend is indicated. A strong
uptrend is indicated when the Aroon Up line persistently remains between 70 and 100
while the Aroon Down line persistently remains between 0 and 30.  Likewise a strong
downtrend is indicated when the Aroon Down line persistently remains between 70
and 100 while the Aroon Up line persistently remains between 0 and 30.

Parallel Movement. When the Aroon Up and Aroon Down Lines move parallel with
each other (are roughly at the same level), then consolidation is indicated.  Expect
further consolidation until a directional move is indicated by an extreme level or a
crossover.

Crossovers. When the Aroon Down line crosses above the Aroon Up line, potential
weakness is indicated.  Expect prices to begin trending lower. When the Aroon Up
line crosses above the Aroon Down line, potential strength is indicated.  Expect prices
to begin trending higher.

 
Προσέγγιση 2

Formula

$high:=high;
$HH:=$high.PeriodenMaximum[14];

$aroon_up:=100*(14-((if($high.Before[1]=$HH;1;
if($high.Before[2]=$HH;2;
if($high.Before[3]=$HH;3;
if($high.Before[4]=$HH;4;
if($high.Before[5]=$HH;5;
if($high.Before[6]=$HH;6;
if($high.Before[7]=$HH;7;
if($high.Before[8]=$HH;8;
if($high.Before[9]=$HH;9;
if($high.Before[10]=$HH;10;
if($high.Before[11]=$HH;11;
if($high.Before[12]=$HH;12;
if($high.Before[13]=$HH;13;
if($high.Before[14]=$HH;14;0)))))))))))))))))/14;

$Low:=Low;
$LL:=$Low.PeriodenMinimum[14];
$aroon_down:=100*(14-((if($Low.Before[1]=$LL;1;
if($Low.Before[2]=$LL;2;
if($Low.Before[3]=$LL;3;
if($Low.Before[4]=$LL;4;
if($Low.Before[5]=$LL;5;
if($Low.Before[6]=$LL;6;
if($Low.Before[7]=$LL;7;
if($Low.Before[8]=$LL;8;
if($Low.Before[9]=$LL;9;
if($Low.Before[10]=$LL;10;
if($Low.Before[11]=$LL;11;
if($Low.Before[12]=$LL;12;
if($Low.Before[13]=$LL;13;
if($Low.Before[14]=$LL;14;0)))))))))))))))))/14;

$aroon_up.LinesMulti[$aroon_down]
.LineNames["AROON_up";"AROON_down"]
Προσέγγιση 3:

Aroon
Developed by Tushar Chande in 1995, the Aroon is an indicator system that can be
used to determine whether a stock is trending or not and how strong the trend is.
"Aroon" means "Dawn's Early Light" in Sanskrit and Chande choose that name for
this indicator since it is designed to reveal the beginning of a new trend.
The Aroon indicator consists of two lines, Aroon(up) and Aroon(down). The Aroon
Oscillator is a single line that is defined as the difference between Aroon(up) and
Aroon(down). All three take a single parameter which is the number of time periods
to use in the calculation. Since Aroon(up) and Aroon(down) both oscillate between 0
and +100, the Aroon Oscillator ranges from -100 to +100 with zero serving as the
crossover line.
Aroon(up) for a given time period is calculated by determining how much time (on a
percentage basis) elapsed between the start of the time period and the point at which
the highest closing price during that time period occurred. When the stock is setting
new highs for the time period, Aroon(up) will be 100. If the stock has moved lower
every day during the time period, Aroon(up) will be zero. Aroon(down) is calculated
in just the opposite manner, looking for new lows instead of new highs.

Technically, the formula for Aroon(up) is [ (# of periods) - (# of periods since

highest close during that time) ] / (# of periods) x 100.
The formula for Aroon(down) is [ (# of periods) - (# of periods since lowest close
during that time) ] / (# of periods) x 100.
For example, consider plotting a 10-period Aroon(up) line on a daily chart. If the
highest closing price for the past ten days occured 6 days ago (4 days since the start of
the time period), Aroon(up) for today would be equal to ((10-6)/10) x 100 = 40. If the
lowest close in that same period happened yesterday (i.e. on day 9), Aroon(down) for
today would be 90.

Interpretation Guidelines: Chande states that when Aroon(up) and Aroon(down) are
moving lower in close proximity, it signals a consolidation phase is under way and no
strong trend is evident. When Aroon(up) dips below 50, it indicates that the current
trend has lost its upwards momentum. Similarly, when Aroon(down) dips below 50,
the current downtrend has lost its momentum. Values above 70 indicate a strong trend
in the same direction as the Aroon (up or down) is under way. Values below 30
indicate that a strong trend in the opposite direction is underway.
The Aroon Oscillator signals an upward trend is underway when it is above zero and a
downward trend is underway when it falls below zero. The farther away the oscillator
is from the zero line, the stronger the trend.