Aroon Indicator

AAA

DEFINITION of 'Aroon Indicator'

A technical indicator used for identifying trends in an underlying security and the likelihood that the trends will reverse. It is made up of two lines: one line is called "Aroon up", which measures the strength of the uptrend, and the other line is called "Aroon down", which measures the downtrend. The indicator reports the time it is taking for the price to reach, from a starting point, the highest and lowest points over a given time period, each reported as a percentage of total time.

 

Aroon Indicator

INVESTOPEDIA EXPLAINS 'Aroon Indicator'

The Aroon indicator was developed by Tushar Chande in 1995. Both the Aroon up and the Aroon down fluctuate between zero and 100, with values close to 100 indicating a strong trend, and zero indicating a weak trend. The lower the Aroon up, the weaker the uptrend and the stronger the downtrend, and vice versa. The main assumption underlying this indicator is that a stock's price will close at record highs in an uptrend, and record lows in a downtrend.

This indicator is very similar to the directional movement index (DMI) that was developed by Welles Wilder, which is also a very popular indicator used to measure the strength of a given trend.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Countertrend Trading

    A type of swing-trading strategy that assumes a current trading ...
  3. Trend

    The general direction of a market or of the price of an asset. ...
  4. Aroon Oscillator

    A trend-following indicator that uses aspects of the Aroon indicator ...
  5. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
  6. Crossover

    The point on a stock chart when a security and an indicator intersect. ...
RELATED FAQS
  1. What are the differences between an Aroon indicator and an Aroon oscillator?

    Read more about the relationship between the Aroon indicator and the Aroon oscillator, and learn how traders use both to ...
  2. What are the main trading signals of the Aroon oscillator?

    Learn more about the Aroon oscillator, a technical tool used by analysts and traders to measure the direction and strength ...
  3. What technical indicators can I use to find undervalued stock?

    Investors seeking new ideas may want to look to technical analysis to see whether the market has undervalued a particular ...
Related Articles
  1. Active Trading

    3 Technical Tools To Improve Your Trading

    Find out how volume, the Aroon indicator and Fibonacci numbers can improve your profits.
  2. Active Trading

    Finding The Trend With Aroon

    Don't be confused about whether a long-term trend will continue, stall or reverse.
  3. Charts & Patterns

    Why These Are 2015's Most-Promising Bank Stocks

    Which bank stocks should offer the best bang for your buck in 2015? Possibly these, so read on.
  4. Chart Advisor

    Trade Healthcare Providers with this ETF

    In good times and bad times one of the best sectors for retail investors to look into is the healthcare providers. Here's an ETF to consider.
  5. Fundamental Analysis

    Is Apple's Stock Over Valued Or Undervalued?

    Despite several drawbacks, the CAPM gives an overview of the level of return that investors should expect for bearing only systematic risk. Applying Apple, we get annual expected return of about ...
  6. Trading Strategies

    Trading On The Psychology Of Round Numbers

    Price action around big round numbers, like 10, 100 and 1000 set up special trading opportunities that take advantage of shifting crowd psychology.
  7. Options & Futures

    The Most Important Technical Indicators For Binary Options

    Trading binary options is not for the novice, but if you're ready to delve in, get to know the best technical indicators.
  8. Chart Advisor

    Commodity Traders Are Using Momentum To Profit From These Stocks

    Active traders are drawn to momentum strategies. These momentum winners of 2015 are worth a trader's second look.
  9. Trading Strategies

    How To Make The Most of Fibonacci Grids

    Build your Fibonacci skills by finding the longest price swing on your chart of interest and placing a grid over the trend. Repeat at shorter intervals.
  10. Trading Strategies

    Day Trading: Top Scenarios To Take Profits

    Three ways to take profits while day trading, based on price movement and what the asset is doing that day.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center