Real Author:
Tushar Chande
The term "Aroon" comes from Sanskrit, meaning "dawn's early light." This nifty indicator is designed to forecast shifts in price trends, whether we’re heading into a bull run or a flat market.
You can calculate the Aroon Oscillator with this formula:
Aroon Oscillator = Bearish Indicator - Bullish Indicator
Where:
Bullish Indicator = [(N periods - N periods from the highest high) / N periods] * 100
Bearish Indicator = [(N periods - N periods from the lowest low) / N periods] * 100
When analyzing the Aroon Oscillator, there are three key signals to keep an eye on:
- Critical Value Alerts: When the oscillator hits -100 or +100, it indicates a strong downward or upward trend, respectively.
- Trend Beginnings: Breakouts around Aroon Up = +50 and Aroon Down = -50 signify the start of a new trend, either increasing or decreasing.
- Weak Trends: If the oscillator is hovering between Aroon Up = +50 and Aroon Down = -50, it suggests a weak trend or a complete lack of direction.
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