How it works
Aroon ignores how far price has moved and asks only about timing: how many bars have passed since the highest high of the lookback, and how many since the lowest low? Those two counts are turned into percentages. If today is the highest high of the last 14 bars, Aroon Up reads 100. If the highest high was 14 bars ago, it reads 0. Aroon Down does the same for lows.
That design makes it a genuinely different measurement from almost everything else in the trend family. Momentum tools measure magnitude; ADX measures one-sidedness; Aroon measures recency. A market can grind higher in tiny increments and keep Aroon Up pinned at 100 because it keeps setting new highs, while a market that jumped violently a month ago and has done nothing since will show Aroon Up decaying toward zero even though price is far above where it started.
The most useful readings come from the two lines together. Both high and interleaved means the market is making new highs and new lows in quick succession, which is a range. Aroon Up at 100 with Aroon Down near 0 is a clean uptrend that keeps extending. Both lines low at the same time is the interesting one: neither a new high nor a new low has occurred for most of the lookback, which is consolidation, and consolidation after a trend usually resolves in the trend’s direction.
Many platforms also plot the Aroon Oscillator, the difference between the two lines, on a scale from -100 to +100. It compresses the same information into one series and is convenient as a filter, at the cost of hiding the both-low consolidation state that is often the most informative.
Against ADX, Aroon reacts sooner. ADX is double-smoothed and slow; Aroon changes the moment a new extreme is or is not made, which makes it a better early warning that a trend has stopped extending and a worse judge of how strong that trend was.
Calculation
The arithmetic in words, in the order it happens.
Over a lookback of N periods, find how many bars have elapsed since the highest high in that window. Aroon Up is 100 times (N minus that count) divided by N. Aroon Down applies the identical arithmetic to the number of bars since the lowest low. Both lines are therefore bounded between 0 and 100 and move in discrete steps of 100/N. The Aroon Oscillator, where plotted, is Aroon Up minus Aroon Down, ranging from -100 to +100.
Source
An AlgoBeamScript implementation of the formula above, written by us from the arithmetic so the code and the calculation agree line for line.
Runs unchanged on the platform and in the AlgoBeamTS runtime. The language reference is in the documentation.
Inputs
Defaults are the values most charting packages ship with. They are conventions, not optimal settings — the right length depends on your instrument and your holding period.
| Input | Default | What it changes |
|---|---|---|
| Length | 14 | The lookback window and the resolution of the indicator: with 14 bars each step is roughly 7 points. Shorter lengths make the lines flick between extremes on ordinary swings; 25 is the other common setting and gives a much steadier read on intermediate trends. |
How to read it
What practitioners take from the plot. Read these as descriptions of market state, not as entry signals.
- Aroon Up at or near 100, Aroon Down near 0
- The market is setting new highs and has not made a new low in the whole window. A clean, extending uptrend regardless of how large the moves have been.
- Both lines below 50
- Neither a new high nor a new low for most of the lookback: consolidation. After a strong trend this is a pause rather than a reversal more often than not.
- Lines crossing
- The more recent extreme has changed sides. An early signal of a possible trend change and a frequent source of false alarms in a range.
- Aroon Up decaying while price holds up
- Price is being maintained but no longer extending. The trend has stopped doing the one thing that defines it, which usually precedes either a base or a top.
- Both lines high and interleaved
- New highs and new lows in rapid succession — a volatile, directionless market where trend rules should be disabled.
Limitations
Where this indicator misleads. None of these are fixed by a better parameter.
- It measures time, not magnitude. A one-tick new high counts exactly as much as a violent breakout, so Aroon will call a listless drift and a powerful trend by the same number.
- The values move in coarse steps of 100/N, which makes the lines jumpy on short lookbacks and gives a false impression of precision.
- Line crossings are frequent and unreliable in ranges — the same weakness every trend tool has, made worse here because a single marginal new extreme is enough to trigger one.
- Because it only tracks the extremes of the window, a long-past spike keeps dominating both lines until it rolls out, at which point the reading can jump for reasons that have nothing to do with current trade.
Educational reference. This page explains how an indicator is built and how it is commonly read. It is not investment advice, not a recommendation and not a signal service. No indicator is profitable on its own — each is a way of describing a market, and any rule built on one has to be tested with realistic costs before it is traded.