The Aroon indicator is a powerful and useful technical tool that provides a visual representation of price movements and trend changes in the financial markets. It was created by Toby Crabel, who described it as a “String of Pearls” pattern analysis method.

The indicator is a combination of two lines: the Aroon Up line and Aroon Down line. The Aroon Up line evaluates the number of periods since the last 25-period high, while the Aroon Down line evaluates the number of periods since the last 25-period low. The indicator value is calculated based on the 25-period highs and lows of the security. Higher values of the Aroon Up line indicate a more recent 25-period high, and lower values of the Aroon Up line indicate an older high. Similarly, lower values of the Aroon Down line indicate a more recent 25-period low, and higher values indicate an older low.

If the Aroon Up line is above the Aroon Down line, this is indicative of bullish price behavior—meaning, the security may be in an uptrend. On the other hand, if the Aroon Down line is above the Aroon Up line, this can signal bearish price behavior and that the security may be in a downtrend. A strategy might be to buy when the Aroon Up line crosses above the Aroon Down line, and sell when the Aroon Down line crosses above the Aroon Up line.

The Aroon indicator oscillates between zero and 100. A value over 50 indicates that a high/low (whichever line is over 50) was seen in the last 12 periods, while a value below 50 indicates that an older high/low was seen within the last 13 periods.

It is important to remember that while the Aroon indicator can provide useful information, it should not be seen as a standalone indicator. It should be used in conjunction with other technical tools, such as other trend indicators and support/resistance levels, in order to make a more informed trading decision.