Aroon Indicator - Mathematics and stock indicators in Python 16

Key Takeaways

hello and welcome to another mathematics and stock indicators tutorial within python next few videos are going to be discussing this term right here uh arun in the indicator it was developed by tushar shande back in the mid 90s and arun is sanskrit for literally meaning dawn's early light so if that doesn't give you an idea what a rune is here we go it's going to determine whether or not a stock is trending and then that trend strength if it is and the calculation for a rune is pretty simple and this is one of the more simple indicators that we're going to even be covering and so to calculate it it's going to be there's going to be two lines here and you're going to have the arun upline and the roon downline the rune up line is going to be time frame minus how long since the last high divided by that time frame times 100 so it's kind of like a percentage of how long um and that percentage is going to be of whatever time frame you choose so you can choose anything you choose a 5 you can choose a 10 day or something like that but the idea here is how long has it been since the last uh high price right the last highest price so um i wouldn't necessarily recommend you use something as short as like a five it's probably better to use like a 15 to 20 something plus um and then the down is basically the exact same thing only it's just for how long since the last low so with this indicator you could actually forget about dividing by the time frame times 100 for the percentage thing you could just leave it and the indicator will look exactly the same but this is just kind of a way to normalize it if you wanted to compare it to maybe you wanted to compare it to another chart and still display the arun line so yeah you can just keep that in mind now finally that's pretty much it now i'm going to show you guys a few examples including you know what we're going to be doing with this um so let me bring up the charting application here and uh so now uh we'll just pick something we'll do uh we'll do apple first and here it is and we just drag it over here and fit it okay so here's an apple and down here is our room we're using a 20 time period so it's 20 days um although it's probably a little bit more than that so our time frame or the stock here is 10 years so it's probably actually more like 60 days but anyway um so as you can see the idea here we've got you know the arun upline is this green line the room down line is this red line so every time you know this trend starts trending up i mean this thing the arun called it instantly here right as that new high was uh announced and then it keeps hitting new highs so it continues trending up and then you can almost see here where it kind of pops down a little bit there and so the room down is kind of coming up but we're still you know we still have no crossover still had no crossover we didn't even have a crossover until this point here which you know is right here and it did trend down sure enough and then it crossed back over again here and didn't cross over again until really here and then it continued going up and then we finally had you know nice strong downward and sure enough it did go down so honestly for the simplicity of this indicator um i was pretty surprised i've never actually used the iron indicator before i decided i was going to do tutorial video on it and uh pretty interesting indicators say the least you don't really hear too much about this one or at least i didn't but maybe that's just apple right so let's go ahead and let's look at a couple other ones so we'll do let's do ebay ebay has done a lot of fluctuating at least recently it's all year to date ebates you can see how ebay has been doing this year so again you can see here uh where we've got a definite uptrend here sure enough it calls it at about here and then says you know hey you might want to leave right about here um and then again it says you might want to leave right about here and sure enough you should have left uh did signal you here but then told you never mind um really a little bit after so like here um anyway downtrend here uptrend there sure enough i mean it's calling these trends pretty well which again i'm just pretty surprised i didn't have too much faith in this indicator when i was looking at how you calculate it um i should have let me go back here do this hopefully yeah so like if you were looking at a shorter time frame this is an example where you know you might want uh like this would be just under year to date and we're using each little thing is about three days so to give you an idea here let's uh plot let me plot up a one year of ebay we'll keep 20 and see how that looks so let me close out of this and edit the time frame here for us so here is uh still in a room 20 only we're considering one year's data so it's every day right and so as you can see here with a highly volatile stock you're kind of getting late signals right so you're getting signaled that it's an uptrend here and you're getting signaled that never mind here and then you're getting signal up trend again here at the peak of this stock and so on so again i'd like to use ebay because ebay is like one of the most volatile like up down up down up down up down stocks like this year to date uh at least that everybody knows about and so that's a good example whereas you can compare this to maybe a company like tesla who's just only recently started coming down but for the most part was just an uptrend the whole way um it was actually quite accurate so for for i would say you know long-term investing uh this is actually a pretty decent pretty decent indicator right um because here in this scenario with a nice level non-highly volatile stock you can see here that indeed it it would have made you money to trade it with tesla but of course tesla was going up the whole time but you can see where tesla's going down here and if you were warned of that you know really right here which is quite a good warning because you know the crossover the moving average was pretty late as well so um for later than this anyway uh that's that with uh this this rune indicator in the next video what we're going to be talking about is actually programming this rune indicator into python and then after that we're going to actually uh graph it up just like this so you guys can play with it yourself and see what you think so anyway stay tuned for the next video as always thanks for watching thanks for the support of the subscriptions and until next time