Aroon Oscillator

DEFINITION of 'Aroon Oscillator'

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. The Aroon oscillator is calculated by subtracting Aroon down from Aroon up. Readings above zero indicate that an uptrend is present, while readings below zero indicate that a downtrend is present.

BREAKING DOWN 'Aroon Oscillator'

Aroon up and Aroon down are the two components that comprise the Aroon indicator. The notion is that an asset is trending up when a stock is trading near the high of its range. Aroon up is used to measure the strength of the uptrend, while Aroon down is used to measure the strength of the downtrend. Many traders will watch for a cross above the zero line to suggest the beginning of a new uptrend. Conversely, a cross below zero would indicate the start of a downtrend. Readings near zero suggest that a security may be trending sideways and that this period of consolidation could continue.

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RELATED FAQS
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    Learn more about the Aroon indicator, including how to build a strategy based on bullish and bearish trends for individual ... Read Answer >>
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  3. What is the Aroon indicator formula and how is the indicator calculated?

    Read about the two formulas used to derive Aroon up and Aroon down, the dual indicators that make up the Aroon system, and ... Read Answer >>
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