webcab.lib.finance.trading.indicators
Class Aroon

java.lang.Object
  |
  +--webcab.lib.finance.trading.indicators.Aroon

All Implemented Interfaces:

Serializable

public class Aroon

extends Object

implements Serializable

Within this class we define the Aroon indicator which was developed by Tushar Chande in order to establish whether a price is trending or within a trading range. The Aroon indicator is made up of the Aroon Down indicator and the Aroon Up indicator and together are said to form the Aroon indicator. We also provide the Aroon Oscillator within this component.

The determination of whether a market is trending and within a trading range is a key difficulty is the development of trading systems. The Aroon indicator has been developed in order to indicate when a trending approach such as moving averages or the trading range approach such as the application of oscillators in more appropriate.

Interpretation
Interpretation of the Aroon indicator depends on identifying one of the following three scenarios:

• Extended Up or Down - When the Aroon up indicator hits 100, (i.e. a high in the past day) then it could indicate the start of a up trend. If the value of the Aroon Up indicator stays in the range 70-100, and the Aroon Down indicator within the range 0-30, then it indicates that a market up trend is taking place. Conversely, when the Aroon Down indicator hits 100, (i.e. a low in the past day) then it could indicate the start of a down trend. If the value of the Aroon Up indicator stays in the range 70-100, and the Aroon Up indicator within the range 0-30, then it indicates that a market down trend is taking place.
• Parallel Movement - If the Aroon Up and Aroon Down are moving parallel to one another and/or lie within the range 30-70 then consolidation of the asset is indicated.
• Crossover of Indicators - The Aroon Up indicator cross from below to above the Aroon Down indicator then a bullish signal is indicated, conversely if the Aroon Down indicator cross from below to above the Aroon Up indicator then a bearish signal is indicated.

For more information on the Aroon indicator see the article written by Tushar Chande in the September 1995 issue of Technical Analysis of Stocks and Commodities.

See Also:

Serialized Form

Constructor Summary

Aroon()
Creates a new instance.

Method Summary

double	aroonDown(double[] lows) Calculates the Aroon Down indicator which measures the relative time since the last lowest low.
double	aroonOscillator(double aroonUpIndicator, double aroonDownIndicator) Evaluates the Aroon Oscillator over the last n-days which is given by the following formulae: Aroon Oscillator = (Aroon Up Indicator) - (Aroon Down Indicator) where "(Aroon Up Indicator)" can be evaluated using aroonUp, and "(Aroon Down Indicator)" can be evaluated using aroonDown.
double	aroonUp(double[] highs) The Aroon Up indicator measures the relative time since the last highest high.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

Aroon

public Aroon()

Creates a new instance.

Method Detail

aroonUp

public double aroonUp(double[] highs)

The Aroon Up indicator measures the relative time since the last highest high. The indicator will return a value between 0 and 100, where a higher value indicates that the highest high was achieved more recently. Persistent values between 70 and 100 are said to indicate strength in the asset and in conjunction with the a low range (i.e. 0-30) in the Aroon Down indicator indicate an upward trend.

Formula for the Aroon Down Indicator

The Aroon Up indicator is given by:

100(n - (number of days since last highest high over n days))/n

where n is the number of days being considered (a reasonable default value for n is 14).

Parameters:

highs - an array of the trading highs over the last n-periods

Throws:

IllegalArgumentException - thrown is the `highs' array is empty.

aroonDown

public double aroonDown(double[] lows)

Calculates the Aroon Down indicator which measures the relative time since the last lowest low. The indicator will return a value between 0 and 100, where a higher value indicates that the lowest low was achieved more recently. Persistent values between 70 and 100 are said to indicate weakness in the asset and in conjunction with the a low range (i.e. 0-30) in the Aroon Up indicator indicate an downward trend.

Formula for the Aroon Down Indicator

The Aroon Down indicator is given by:

100(n - (number of days since last highest high over n days))/n

where n is the number of days being considered (a reasonable default value for n is 14).

Parameters:

lows - an array of the trading lows over the last n-periods

Throws:

IllegalArgumentException - throw when the `lows' array is empty.

aroonOscillator

public double aroonOscillator(double aroonUpIndicator,
                              double aroonDownIndicator)

Evaluates the Aroon Oscillator over the last n-days which is given by the following formulae:

Aroon Oscillator = (Aroon Up Indicator) - (Aroon Down Indicator)

where "(Aroon Up Indicator)" can be evaluated using aroonUp, and "(Aroon Down Indicator)" can be evaluated using aroonDown.

Parameters:

aroonUpIndicator - the value of the Aroon Up Indicator

aroonDownIndicator - the value of the Aroon Down Indicator