Indicator Aroon was developed by Tushar Chande in 1995 to evaluate trend strength. The indicator can be used to see when the existing trend can change its direction.
In fact, the indicator measures the time necessary for the price to reach its highest and lowest values within a certain time interval in percents of the total time. The indicator consists of the “Aroon up” line measuring uptrends and the “Aroon down” line measuring the strength of the downtrend.
There are three adjustable parameters:
Period – calculation period;
Overbought – overbought level;
Oversold – oversold level.
Calculation:
Aroon Up[i] = 100 * (Period - i + PosMax) / Period
Aroon Dn[i] = 100 * (Period - i + PosMin) / Period
where:
PosMax, PosMin – numbers of bars for the highest and lowest prices within the predefined Period.
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