Real author:
Tushar Chande
The Aroon Indicator, created by Tushar S. Chande, the CEO of Tuscarora Capital Management, has been a game-changer since its introduction in 1995. Chande is also the author of essential reads like 'The New Technical Trader: Boost Your Profit by Plugging into the Latest Indicators' and 'Beyond Technical Analysis: How to Develop and Implement a Winning Trading System'. This powerful tool helps traders identify the direction and strength of trends.
One of the key benefits of the Aroon Indicator is its ability to pinpoint the start of a new trend or the end of an existing one.
You can easily calculate the Aroon Indicator using these formulas:
Bullish Indicator = [(N periods - N periods from the highest maximum) / N periods] * 100
Bearish Indicator = [(N periods - N periods from the lowest minimum) / N periods] * 100
These equations take into account recent highs and lows. When the indicator values are higher, it signifies more recent maximums and minimums, while lower values indicate older ones. The Aroon Indicator ranges between 0 and 100, where higher values suggest a stronger trend and lower values point to a weaker trend.
Keep an eye on the key levels of 30 and 70. Values above 70 signal a strong trend, while those below 30 suggest a weak one. Movements within the 30 to 70 range indicate market instability. For instance, if the bullish indicator climbs above 70 while the bearish indicator drops below 30, you're likely in an upward trend. Conversely, crossovers between the bullish and bearish indicators within the 30 to 70 range can confirm trend changes. If the bullish indicator crosses above the bearish one, that’s a solid confirmation of an upward trend.
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