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Aroon Oscillator

The Aroon is an indicator system which helps to define if the trading instrument is trending or not and if the trend is strong. Aroon Indicator and Oscillator were developed by Tushar Chande in 1995. "Aroon" is translated from Sanskrit as "Dawn's Early Light" and Chande named the indicator like that as it's supposed to reflect the start of a new trend. The two lines, "Aroon up" and "Aroon down" form The Aroon indicator. The Aroon Oscillator is one line that is a distinction between "Aroon up" and "Aroon down". These three lines take the same parameter - the number of time periods - for the calculation. Both "Aroon up" and "Aroon down" fluctuate between 0 and +100, that's why the Aroon Oscillator can make up from -100 to +1 00, while with zero is used as the crossover line.

To calculate "Aroon up" for a certain period of time you should define how much time in percents passed between the beginning of the time period and the point when there was the highest peak during that time period. For example, "Aroon up" will be 100 if the instrument is setting new highs for the time period. And "Aroon up" will be zero when the instrument has moved lower every day during the time period.

To calculate "Aroon down" you should do the opposite action and to search new falls and not new peaks. Chande says that when "Aroon up" and "Aroon down" are moving lower in close proximity, it demonstrates an integration phase has started and strong trend isn't obvious. If "Aroon up" falls under 50, it means that the ongoing trend has lost its upwards momentum. In the same way when "Aroon down" falls under 50, the ongoing downtrend has lost its momentum. Values higher than 70 show a strong trend in the same direction as the "Aroon up or down" is starting. Values less than 30 mean that a strong trend in the contrary direction is starting.