Aroon Oscillator

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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.

RELATED TERMS
  1. Sideways Trend

    Describes the horizontal price movement that occurs when the ...
  2. Consolidation

    In technical analysis, the movement of an asset's price within ...
  3. Trend

    The general direction of a market or of the price of an asset. ...
  4. Oscillator

    A technical analysis tool that is banded between two extreme ...
  5. Aroon Indicator

    A technical indicator used for identifying trends in an underlying ...
  6. Downtrend

    Describes the price movement of a financial asset when the overall ...
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RELATED FAQS
  1. What are the differences between an Aroon indicator and an Aroon oscillator?

    The Aroon oscillator is an extension of the Aroon indicator. More accurately, it is an interpretation of the relationship ... Read Full Answer >>
  2. How can I build a trading strategy based on the Aroon indicator?

    One of the primary goals of technical market analytics is to identify performance trends in individual securities or indexes. ... Read Full Answer >>
  3. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  4. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  5. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>
  6. What are the alert zones in a Fibonacci retracement?

    The most commonly used Fibonacci retracement alert levels are at 38.2% and 61.8%. A 50% retracement level is also commonly ... Read Full Answer >>

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