Aroon was created by Tushar Chande and identifies trends in a stock or index. It is comprised of two lines – Aroon up, which measures the strength of an uptrend, and Aroon down, which measures the strength of a downtrend. Both lines fluctuate between 0 and 100. The lower the number for Aroon up, the weaker the uptrend, while the lower the number for Aroon down, the weaker the downtrend. When the Aroon up line is above the Aroon down line an uptrend is indicated. When the down line is above the up line a downtrend is indicated. High readings for the Aroon up line mean that price is trading at new highs for the specific lookback period. High readings for the Aroon down line mean that price is trading at new lows for the specific lookback period. In Scottrader, the default lookback period is 14 bars. A reading of 100 for the up line is an indication of a potential emerging uptrend, and a reading of 100 for the down line is an indication of potential emerging downtrend.
The default parameter setting in Scottrader is 14 and the calculations are shown below:
Aroon-Up = ((14 - Days Since 14-day High)/14) x 100
Aroon-Down = ((14 - Days Since 14-day Low)/14) x 100