Aroon oscillator is a kind of cross over oscillator indicator.

Being a cross-over oscillator indicator, the Aroon oscillator indicator was created by Tushar Chande to help traders to know whether the market is trending in an upwards or downwards direction thus enabling traders to know when to enter and exit the market. All these are based on crossover.

According to Tushar Chande, Aroon oscillator indicator is based on Aroon up and Aroon down lines. Aroon up is mostly indicated using a blue line while Aroon down is mostly indicated using a red line.

Since the Aroon oscillator indicator is an oscillator, it, therefore, has an oscillation at point 0 ranging from 0 to 100.

Tushar Chande used a  period of 25 to calculate the values of Aroon oscillator as follows;

Aroon oscillator= Aroon up - Aroon down

where as

Aroon up = ((25-periods since 25 period high)/25)*100;

Aroon down = ((25-periods since 25 period low)/25)*100;

Since Aroon oscillator indicator is a trend oscillator with an oscillation at point 0 ranging between 0 to 100,it therefore follows that when Aroon(up) oscillator crosses Aroon down above 0 then the trader should be trading upwards while when the Aroon(down) oscillator crosses Aroon up below 0, then the trader should be trading downwards. On the other hand, if Aroon up crosses Aroon down at above 50, that will be an indication of an overbought market thus the trader should exit any buy position and enter a sell position since the market will start moving downwards while if Aroon down crosses Aroon up at below 50,that will be an indication of an oversold market thus the trader should exit any sell position and enter a buy position since the market will start moving upwards. This is indicated from the candlesticks chart below;

From the candlesticks chart above, there is point A, point B, Aroon down(with red line) and Aroon up(with blue line) indicated using the red arrows.

At point A,Aroon down has crossed Aroon up at below 50 thus an indication of an oversold market at that point thus signaling the trader to exit any sell position and enter a buy position since the market was starting an upward trend while at point B,Aroon up has crossed Aroon down at above 50 thus an indication of an overbought market at that point thus signaling the trader to exit any buy position and enter a sell position since the market was starting a downward trend .

 

Recommendation: If you are a day trader, use 1 min,5 min,15 min, and 30 min timeframe while if you are a swing trader just use 1 hour and above timeframe if you want Aroon oscillator indicator to work well for you.

If you would like to support our work, here is our tipping details;
skrill donation:[email protected]
Neteller donation:[email protected]
Bitcoin:1Fp5aLgRB6WJnC7nxGw57M3JbbexaAWHG2
Ethereum; 0x346570c491b76c7cd51699bdd272762111b743a9
Litecoin: LeEH7B82ccXJ6QoibCryGJNpDGNx2x77fL
Dogecoin: DLShs2vqhMc1ggqo8MPPMBTcPAZdqCZoWd