AROON INDICATOR - DOCUMENTATION (DESCRIPTIONS OF EXISTING RULES/INDICATORS)

[Cal231995]

What is the Aroon Indicator?

The Aroon indicator is a technical indicator that is used to identify trend changes in the price of an asset, as well as the strength of that trend. In essence, the indicator measures the time between highs and the time between lows over a time period. The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows. The indicator signals when this is happening, and when it isn't. The indicator consists of the "Aroon up" line, which measures the strength of the uptrend, and the "Aroon down" line, which measures the strength of the downtrend.

Formula for Aroon How to compute The Aroon calculation requires the tracking of the high and low prices, typically over 25 periods. 1.)Track the highs and lows for the last 25 periods on an asset. 2.)Note the number of periods since the last high and low. 3.) Plug these numbers into the Up and Down Aroon formulas.

Allocation Strategy The strategy is to identify trend shifts or reversals.

Bullish Reversal: when aroon up crossover above the aroon down. Bearish Reversal: when aroon up crossover below the aroon down .

The theory suggests that asset price will have a trend shift when a crossover of aroon up and down is made. So:

if Aroon up=100 and aroon down = 0 then allocation = max_allocation(long position)

if Aroon up = 0 and aroon down = 100 then allocation = -max_allocation(short position) else: allocation = 0

https://www.investopedia.com/terms/a/aroon.asp

[Cal231995]

@ta-oliver should I add @fhashim here also ? thanks

[ta-oliver]

Yes - good to work with @fhashim on the LaTeX documentation.