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Key Takeaways
- Aroon measures elapsed time since the most recent price extreme rather than the size of the price move, which separates it from magnitude-based oscillators such as RSI.
- Aroon Up and Down convert the ages of the selected high and low into readings from zero to 100. A new extreme or an old extreme leaving the window can change the selected age.
- Tushar Chande introduced the indicator in 1995, and 25 periods is the standard lookback in the published descriptions; check the chart’s setting before comparing readings.
- High Aroon Up with low Aroon Down means the selected high is more recent and the selected low is older. Read price structure to define the setup.
- The Aroon Oscillator is Aroon Up minus Aroon Down, spans −100 to +100, and crosses zero at exactly the moment the two lines cross.
- Aroon reads how fresh the highs and lows are. The price chart and ATR add the path and the size of the move.
What is the Aroon indicator?
The Aroon indicator is a pair of lines, introduced by Tushar Chande in 1995, that measure how many periods have passed since the highest high and the lowest low in a lookback window. Aroon Up follows the high and Aroon Down follows the low, each on a scale from 0 to 100, so the indicator reports how recently the selected extremes occurred.
An extreme on the current bar gives its line a value of 100. Older selected extremes produce lower readings. The calculation uses age rather than the dollar size of the move.
How is the Aroon indicator calculated?
N = 25 covers the current bar and the 25 before it: 26 bars, with ages from zero through 25. If an extreme occurs more than once, select its most recent occurrence.
Aroon Up = 100 × (25 − age of the selected high) / 25. Apply the same formula to the selected low for Aroon Down.
At N = 25 each line moves in four-point steps, so every bar of aging costs 4 points. A shorter N moves in bigger steps and reacts faster.
Formula
Aroon Up = 100 × (N − periods since the N-period high) / N; Aroon Down = 100 × (N − periods since the N-period low) / N; Aroon Oscillator = Aroon Up − Aroon Down- N = 25 covers the current bar plus the 25 before it, 26 bars in all, so an extreme can be zero to 25 bars old.
- Count backward from the current bar. Choose the most recent occurrence when highs or lows tie. An extreme on the current bar has age zero and a reading of 100.
- Each line moves in fixed steps of 100 / N, so a 25-period Aroon changes only in increments of 4.
- The oscillator equals zero when both lines are equal, and it reaches +100 only when the high prints on the current bar while the low sits at the far edge of the lookback.
Aroon indicator example: Up 100, Down 56
Use N = 25 with the current session and 25 preceding sessions. The current bar sets the window high, while the selected window low occurred 11 sessions earlier.
- Aroon Up = 100 × (25 − 0) / 25 = 100, because the high is on the current bar
- Aroon Down = 100 × (25 − 11) / 25 = 100 × 14 / 25 = 56
- Aroon Oscillator = 100 − 56 = 44
- If both selected extremes remain in the next window and neither is replaced, their ages increase by one. Up becomes 96 and Down becomes 52, leaving the oscillator at 44.
Up 100 and Down 56 give an oscillator of +44. The selected high is current and the low is 11 bars old. Both lines decline four points together while those same extremes remain selected, so their difference stays unchanged.
If those same extremes remain selected on the next bar, both ages increase by one. Up becomes 96, Down becomes 52 and the difference stays +44.
A new extreme changes the selected age. When an old extreme leaves the window, another remaining bar also becomes the selected extreme. That replacement can change the difference or cause a crossover without the current bar making a new high or low.
How to read Aroon Up, Aroon Down and the oscillator
Up above Down means the selected high is more recent than the selected low. The reverse ordering means the low is more recent. The oscillator’s sign records exactly that ordering.
The individual levels supply information the difference omits. Up 52 and Down 48 have the same +4 difference as Up 96 and Down 92. The second pair identifies more recent extremes, while price itself supplies their distance.
The chart reaches Up 100 and Down 44 at bar 16. Four bars later they are 84 and 28, still 56 points apart. At bar 21, the new low resets Down to 100.
How traders use the Aroon indicator
Choose whether the setup requires an Up/Down crossing, particular line levels or both. Read the price structure and use ATR for movement scale. Define the decision bar, entry, invalidation, size and exit.
When Aroon Up resets to 100 on a fresh high, read Options Flow for the premium arriving with the new trend, then test each structure against your target and expiration in the Options Profit Calculator.
Limitations of the Aroon indicator
- Aroon measures time, not distance. A new high one cent above the old one sends Aroon Up to 100 just as a large breakout does, so the size of the move has to come from price and ATR.
- Check which bar set each reading before trading a crossover. An old extreme leaving the window can change either reading or cause a crossover with no new high or low on the current bar.
- Read the range width from price when both lines run high. In a narrow range, new highs and lows can print close together, so both lines can read high at once and crossovers can alternate quickly.
- Read both lines beside the oscillator, because it hides the individual levels: Up 52 with Down 48 and Up 96 with Down 92 both read +4.
- Match the lookback, window definition and tie rule before comparing two Aroon charts; each one changes the readings.
Bottom line
The Aroon indicator tells you how recently a lookback’s high and low occurred, which shows whether new highs or new lows are setting the pace. Read both lines with the oscillator, take direction and scale from the price chart and ATR, and define the decision bar, entry and invalidation before acting on a crossover.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Fidelity Learning Center: Aroon
- thinkorswim (Schwab) Learning Center: Aroon Indicator
- thinkorswim (Schwab) Learning Center: Aroon Oscillator
How entries are sourced, calculated and updated: editorial methodology.