Aroon Oscillator
The Aroon Oscillator is a trend-following indicator that uses aspects of the Aroon Indicator (Aroon Up and Aroon Down) to gauge the strength of a current trend and the likelihood that it will continue.
Definition: The Aroon Oscillator is a trend-following indicator that uses aspects of the Aroon indicators (Aroon Up and Aroon Down) to measure the strength of the current trend and whether it will continue. The Aroon Oscillator values range between -100 and 100, derived by calculating the difference between Aroon Up and Aroon Down.
Origin: The Aroon Oscillator was introduced by Tushar Chande in 1995. Chande is a renowned technical analyst who designed the Aroon indicators and the Aroon Oscillator to help investors identify the beginning and end of market trends.
Categories and Characteristics:
- Aroon Up: Measures the time since the highest price within a specific period. Higher values indicate a stronger uptrend.
- Aroon Down: Measures the time since the lowest price within a specific period. Higher values indicate a stronger downtrend.
- Aroon Oscillator: Derived by calculating the difference between Aroon Up and Aroon Down. Positive values indicate an uptrend, while negative values indicate a downtrend.
Specific Cases:
- Case 1: Suppose a stock's Aroon Oscillator value is 80, indicating that Aroon Up is significantly higher than Aroon Down, suggesting a strong uptrend. Investors might consider buying at this point.
- Case 2: If the Aroon Oscillator value is -70, it means Aroon Down is significantly higher than Aroon Up, indicating a strong downtrend. Investors might consider selling or shorting at this point.
Common Questions:
- How to set the time period for the Aroon Oscillator? The common setting is 14 days, but investors can adjust it according to their trading strategy.
- Is the Aroon Oscillator applicable to all markets? The Aroon Oscillator is primarily used in the stock market but can also be applied to other financial markets such as forex and futures.
