What Is the Aroon Oscillator?

The Aroon Oscillator is the difference between Aroon-Up and Aroon-Down. These two indicators are usually plotted together for easy comparison, but chartists can also view the difference between these two indicators with the Aroon Oscillator. This indicator fluctuates between -100 and +100 with zero as the middle line. An upward trend bias is present when the oscillator is positive, while a downward trend bias exists when the oscillator is negative. Chartists can also expand the bull-bear threshold to identify stronger signals. See our investment iq for more details on Aroon-Up and Aroon-Down.

How To Calculate the Aroon Oscillator

The periods since the price recorded an x-day high or low are measured by Aroon-Up and Aroon-Down. Time and price highs are the foundation of Aroon-Up. Time and price lows are the foundation of Aroon-Down.

For example, 25-day Aroon-Up measures the number of days since a 25-day high, while 25-day Aroon-Down measures the number of days since a 25-day low. These indicators are shown in percentage terms and fluctuate between 0 and 100.

The Aroon Oscillator is Aroon-Up less Aroon-Down. The SharpCharts default parameter is 25, and the example below is based on the 25-day Aroon Oscillator.Copy

Aroon-Up = 100 x (25 - Days Since 25-day High)/25
Aroon-Down = 100 x (25 - Days Since 25-day Low)/25
Aroon Oscillator = Aroon-Up  -  Aroon-Down

Aroon Oscillator – Chart 1

When the numbers are crunched, some intriguing matches emerge. Aroon-Up or Aroon-Down must reach a minimum level in order to move over or below a given threshold. For instance, when Aroon-Up equals 100 and Aroon-Down equals 0, the oscillator equals +100. Likewise, when Aroon-Up is 0 and Aroon-Down is 100, the Aroon Oscillator is equal to -100.

To hit +100, the Aroon Oscillator needs to see some significant price movement higher.Similarly, for the oscillator to reach -100, there must be significant downward price movement.

Aroon-Up must be at least 40 for an Aroon Oscillator of +40, meaning Aroon-Down must be 0. A variety of Aroon-Up and Aroon-Down combinations (40-0, 44-4, 48-8, 60-20, 72-32, 80-40, or 100-60) could result in a positive 40.

Generally, a relatively high positive number requires Aroon-Up to be relatively high, while a relatively low negative number requires Aroon-Down to be relatively high. The table below shows an array of Aroon-Up and Aroon-Down pairings to form the Aroon Oscillator.