The Aroon Indicator and Aroon Oscillator were developed by Tushar Chande in 1995. Rather than measuring price magnitude like RSI or momentum like MACD, Aroon measures time — specifically, how recently price has made new highs or lows within a lookback window. This time-based approach gives it a unique edge in identifying trend inception and exhaustion.
Tushar Chande named the indicator after the Sanskrit word for 'dawn's early light' — reflecting the indicator's purpose of identifying the early stages of a new trend before it becomes obvious.
Aroon Up = ((N – Periods since N-period high) / N) × 100. Aroon Down = ((N – Periods since N-period low) / N) × 100. Standard N = 25. If price made a new 25-period high today: Aroon Up = 100. If the last 25-period high was 25 periods ago: Aroon Up = 0.
Aroon Oscillator = Aroon Up − Aroon Down. Ranges from -100 to +100. Above zero: bullish — price making new highs more recently than new lows. Below zero: bearish — price making new lows more recently than new highs. At zero: balance — new highs and lows are equally recent.
| Aroon Up | Aroon Down | Oscillator | Interpretation |
|---|---|---|---|
| 100 | 0 | 100 | Maximum bullish — just made a new high |
| 70–100 | 0–30 | Positive | Strong uptrend in progress |
| 50 | 50 | 0 | Ranging — no directional bias |
| 0–30 | 70–100 | Negative | Strong downtrend in progress |
| 0 | 100 | -100 | Maximum bearish — just made a new low |
When Aroon Up is above 70 and Aroon Down is below 30, a strong uptrend is in progress. New highs are frequent and recent; new lows are distant. This is the environment for trend following strategies. The reverse (Down above 70, Up below 30) defines a strong downtrend.
When both Aroon Up and Aroon Down move together in a narrow band between 30 and 70, the market is ranging. New highs and new lows are occurring with similar frequency — neither buyers nor sellers are dominating. Trend strategies will underperform in this environment; range strategies (mean reversion, oscillators) are more appropriate.
When Aroon Up crosses above Aroon Down, a new uptrend may be starting — bullish signal. When Aroon Down crosses above Aroon Up, a new downtrend may be starting — bearish signal. The highest quality crossovers occur from extreme levels: Aroon Up crossing from above 70 down to below, then reversing back above, is more significant than a crossover that occurs in the middle range.
The Aroon crossover is best used as a regime change signal, not an immediate entry trigger. When Aroon Up crosses above Aroon Down from extreme levels, wait for one or two confirming bars before entering. This reduces false signals significantly without meaningfully reducing profitability.
When Aroon Up rises above 70 while Aroon Down drops below 30, the trend is confirmed. Enter long on a pullback to a moving average or support level, using the Aroon reading as the regime filter. The setup quality is highest when the Aroon Oscillator is above 50 (strong positive bias).
Use Aroon primarily as a market regime classifier before selecting your strategy. High Aroon Up (above 70): trend following — breakouts, moving average bounces, momentum entries. Low both lines (30–70 range): range trading — fade extremes, oscillator reversals. High Aroon Down (above 70): short or avoid long exposure.
Combining Aroon with ADX (Average Directional Index) provides a complete picture: Aroon identifies whether a trend is new or old (time-based). ADX identifies how strong the trend is (magnitude-based). When Aroon Up is above 70 AND ADX is above 25, you have a new, strong trend — the highest quality environment for trend following.
Aroon works well across all timeframes but has specific characteristics worth knowing.
One advantage of Aroon over price-based indicators is that it is not affected by the magnitude of price moves — only the timing. A stock that moved $0.01 to make a new high triggers the same Aroon Up = 100 as one that moved $10. This makes Aroon equally applicable to high and low volatility environments without parameter adjustment.