The Aroon Oscillator is a common indicator used in technical analysis. The oscillator can help you visualize the strength of the price trend as well as how likely it is to continue on its projected path.
In this article, we’ll go over how you can make the most out of the Aroon Oscillator with a handful of proven strategies.
Aroon Oscillator Calculation
Calculating the values for the Aroon Oscillator is relatively straightforward. The indicator works by subtracting the Aroon up from the Aroon down. The most common lookback period for the oscillator is 14 periods, which can be mapped on minutely, hourly, daily, weekly, and monthly charts.
How to use the Aroon Oscillator
The Aroon Oscillator will naturally fluctuate above and below the zero line. These fluctuations tell you of the strength of a trend and if a new trend is about to begin.
For instance, if the oscillator turns up above the zero line, then a new uptrend in prices could be about to begin. The same is true for downtrends, as a move below the zero line can denote selling pressure and a lower price trend.
Incorporating the Aroon Oscillator as part of your strategy could involve the following:
- The indicator may act as a leading indicator that can foreshadow a reversal in the current price trend.
- Alternatively, the indicator can be used in conjunction with other tools to verify that a change in the price trend is about to take place.
In summary, the Aroon oscillator is useful for determining the strength and direction of the price trend. It should not, however, be used in isolation. Additional signals should be taken from other indicators such as the MACD, RSI, or even Bollinger Bands for determining exit and entry points for your trades.