Aroon Oscillator

The Aroon indicator was developed by Tushar S. Chande and first described in the September 1995 issue of Technical Analysis of Stocks & Commodities magazine.

The Aroon Oscillator is a trend following indicator that uses aspects of the Aroon indicators (Aroon Up and Aroon Down) and is calculated by the difference between Aroon Up and Aroon Down. Aroon is unique because it focuses on time relative to price. The Aroon Oscillator will be high when the Aroon Up is high and the Aroon Down is low, indicating a strong upward trend. The Aroon Oscillator will be low when the Aroon Down is high and the Aroon Up is low, indicating a strong downward trend. When the Up and Down are approximately equal, the Aroon Oscillator will hover around zero, indicating a weak trend or consolidation.

Calculation

Aroon Up – Aroon Down

= ((25 - Days Since 25-day Low)/25) x 100
Assuming a parameter of period of 25 days (recommended) Aroon Up= ((25 - Days Since 25-day High)/25) x 100 Aroon Down

The indicator is shown in percentage terms.

Signals

  • If the Aroon Line indicator is above the zero a bullish trend is expected
  • If the Aroon Indicator line is below the zero a bearish trend is expected
  • The further away the Aroon oscillator is from the zero line the stronger the trend