The Aroon indicator is basically a technical indicator that is used for the measurement and determination of trend changes and the strength of the trend for any cryptocurrency asset in the market. This indicator measures the time between the highs and lows of the price of any asset over a period of time. This is because, when the market is in an uptrend, there will be new highs regularly and when the market is in a downtrend, there will be new lows regularly. On the aroon indicator, there are two lines, the Aroon up and the Aroon down. The Aroon up line measures and indicates the uptrend strength and the Aroon down line measures and indicates the downtrend strength.
The Aroon indicator has proven to be really effective and powerful when it comes to measuring trend strength and trend changes and is used by a lot of traders for entry and exit points based on the crossovers of the Aroon lines. Tushar Chande was the developer and creator of the Aroon indicator in 1995. The sole purpose why the Aroon indicator was created was to measure and determine the trend changes and trend strengths of an asset over a period of time in the market. On the Aroon Indicator, the default period length is set at 14. The Aroon has two oscillator lines known as the Aroon up and the Aroon down. The Aroon lines moves between zero and hundred. When the Aroon line value is high, it indicates the strength of the trend and when the Aroon line value is low, it indicates the weakness of the trend. In an uptrend, the Aroon up line stays above the Aroon down line and in a downtrend, the Aroon down line stays above the Aroon up line.
The Aroon up and Aroon down are the two main lines of the Aroon indicator that moves between 0 and 100. The Aroon up measures the strength of the trend in the market in an uptrend and is calculated based on price highs. In an uptrend, the Aroon up line stays above the Aroon down line. When the Aroon up line is above the 50% value and the Aroon down is below 50%, it can be an indication that the buyers are in control of the market and there is more possibility that the price will make a new selected period high. When Aroon up line moves above 50, it can be an indication that the uptrend momentum is slowing down and the momentum might be lost.
The Aroon down measures the strength of the trend in the market in a downtrend and is calculated based on price lows. In a downtrend, the Aroon down line stays above the Aroon up line. When the Aroon down line is above the 50% value and the Aroon up is below 50%, it can be an indication that the sellers are in control of the market and there is more possibility that the price will make a new selected period low. When Aroon down line moves below 50, it can be an indication that the downtrend momentum is slowing down and the momentum might be lost.
The crossovers of the Aroon up and Aroon down line can be used as a signal for trend changes. When the Aroon up line crosses above the Aroon down line it can be a signal for a reversal for a potential uptrend, and when the Aroon down line crosses above the Aroon up line it can be a signal for a reversal for a potential downtrend. When Aroon up and Aroon down are moving very close to each other, it is an indication that no strong trend is present or signals consolidation.
Using the 25 period length
For Aroon-Up = [(N period – Periods since recent N period High) / N period] x 100
Where;
Period length specified = N period
Let’s take for instance, AAVE/USDT
Using the formula;
Aroon-Up = [(N period – Periods since recent N period High) / N period] x 100
Where;
N period = 25
Periods since recent N period High = 4 days ago
Aroon-Up = ((25 – 4) / 25) x 100
Aroon-Up = (21 / 25) x 100
Aroon-Up = 0.84 x 100
Aroon-Up = 84
Therefore the Aroon-Up = 84%
For Aroon-Down = [(N period – Periods since recent N period Low) / N period] x 100
Where;
Period length specified = N period
Let’s take for instance, AAVE/USDT
Using the formula;
Aroon-Down = [(N period – Periods since recent N period Low) / N period] x 100
Where;
N period = 25
Periods since recent N period Low = 12 days ago
Aroon-Down = ((25 – 17) / 25) x 100
Aroon-Down = (8 / 25) x 100
Aroon-Down = 0.32 x 100
Aroon-Down = 32
Therefore the Aroon-Down = 32%