QuanTAlib/lib/dynamics/aroon/Aroon.md

# AROON: Aroon Indicator

The Aroon indicator measures the temporal freshness of price extremes, answering not "how much did price move?" but "how long ago did it make a new high or low?" Aroon Up tracks the recency of the highest high within the lookback window; Aroon Down tracks the recency of the lowest low. Both are normalized to 0-100 where 100 means the extreme occurred on the current bar and 0 means it occurred at the far edge of the window. A companion Aroon Oscillator (Up minus Down) provides a single zero-centered metric for trend bias. Unlike recursive indicators that accumulate floating-point drift, Aroon is purely windowed — its value depends only on data within the lookback period, making it immune to initialization artifacts.

## Historical Context

Tushar Chande introduced Aroon in *Beyond Technical Analysis* (1995). The name comes from the Sanskrit word for "Dawn's Early Light," reflecting the indicator's purpose: to spot the dawn of a new trend rather than merely confirm an existing one. Chande's insight was that trends do not simply stop; they age. A trend that has not made a new high in 20 of the last 25 bars is statistically moribund, regardless of how strong the original breakout was. The temporal perspective inverts the usual analysis framework: instead of asking whether price is above or below some average, Aroon asks whether the market is still making progress in a given direction. This makes it particularly effective at identifying the transition zone between trending and ranging regimes.

## Architecture & Physics

### 1. Sliding Window

A circular buffer of size $N+1$ stores the last $N+1$ bars of High and Low values (the current bar plus $N$ historical bars).

### 2. Extremum Search

On each bar, the buffer is scanned to find the index of the highest high and the index of the lowest low within the window.

### 3. Aroon Up

$$\text{AroonUp} = \frac{N - \text{barsSinceHigh}}{N} \times 100$$

where barsSinceHigh is the number of bars elapsed since the highest high.

### 4. Aroon Down

$$\text{AroonDown} = \frac{N - \text{barsSinceLow}}{N} \times 100$$

### 5. Aroon Oscillator

$$\text{AroonOsc} = \text{AroonUp} - \text{AroonDown}$$

Range: $[-100, +100]$.

### 6. Complexity

- **Time:** $O(N)$ per bar for the min/max linear scan (monotonic deque optimization possible for amortized $O(1)$)
- **Space:** $O(N)$ — ring buffers for High and Low
- **Warmup:** $N$ bars to fill the window

## Mathematical Foundation

### Parameters

| Symbol | Parameter | Default | Constraint |
|--------|-----------|---------|------------|
| $N$ | period | 25 | $N \geq 1$ |

### Pseudo-code

```
Initialize:
  highBuf = RingBuffer(period + 1)
  lowBuf = RingBuffer(period + 1)
  bar_count = 0

On each bar (high, low, isNew):
  if !isNew: restore previous state

  highBuf.Add(high)
  lowBuf.Add(low)
  bar_count++

  // Find index of highest high in buffer
  maxIdx = 0
  maxVal = -∞
  for i = 0 to min(bar_count, period):
    if highBuf[i] >= maxVal:
      maxVal = highBuf[i]
      maxIdx = i

  // Find index of lowest low in buffer  
  minIdx = 0
  minVal = +∞
  for i = 0 to min(bar_count, period):
    if lowBuf[i] <= minVal:
      minVal = lowBuf[i]
      minIdx = i

  len = min(bar_count, period)
  barsSinceHigh = len - maxIdx
  barsSinceLow = len - minIdx

  AroonUp = (len - barsSinceHigh) / len × 100
  AroonDown = (len - barsSinceLow) / len × 100
  AroonOsc = AroonUp - AroonDown

  output:
    Up = AroonUp
    Down = AroonDown
    Oscillator = AroonOsc
```

### Interpretation

| Condition | Signal |
|-----------|--------|
| AroonUp > 70, AroonDown < 30 | Strong uptrend (recent highs, stale lows) |
| AroonDown > 70, AroonUp < 30 | Strong downtrend (recent lows, stale highs) |
| Both > 70 | Volatile; both extremes are fresh |
| Both < 30 | Consolidation; both extremes are stale |
| AroonOsc > 0 | Bullish bias |
| AroonOsc < 0 | Bearish bias |

### Step-Function Behavior

Aroon produces discrete jumps rather than smooth curves. When a new extreme occurs, the corresponding line snaps to 100. Between new extremes, the line decays linearly by $100/N$ per bar. This staircase pattern is a natural consequence of the temporal measurement and should not be smoothed away — it carries information about the periodicity of extremes.

## Resources

- Chande, T.S. — *Beyond Technical Analysis* (John Wiley & Sons, 1995)
- Chande, T.S. — *The New Technical Trader* (John Wiley & Sons, 1995)
- PineScript reference: `aroon.pine` in indicator directory