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Aroon Oscillator

What the Aroon Oscillator measures, how to read zero and the ±50 levels, its settings on MillionChart and a worked example on gold.

The Aroon Oscillator is Aroon Up minus Aroon Down: one line from −100 to +100 that says which is fresher, the last high or the last low, and by how much. Above zero the most recent extreme is a high; below zero it is a low. It is Tushar Chande's companion to Aroon (1995), for readers who want the two lines folded into one.

Aroon Oscillator (14) under gold, daily candles
Aroon Oscillator (14) under gold, daily candles

What it shows#

  • Aroon Oscillator — one line in its own pane, −100 to +100. +100 means the current bar is the window's highest high and the lowest low is a full window old; −100 is the opposite.
  • Zero — the dotted centre line. The oscillator crosses it when the more recent extreme changes from a low to a high, or back.
  • Upper (+50) and Lower (−50) — dashed levels: beyond them the trend is clear in that direction.

How it is calculated#

With the window the current bar and the Length bars before it: Aroon Up = 100 × (Length − bars since the highest high) / Length, Aroon Down the same for the lowest low, and the oscillator = Aroon Up − Aroon Down. It uses the high and the low; the source cannot be changed. A tie between two bars goes to the newer one.

How traders use it#

  • Direction: above zero, the market has made a high more recently than a low; below zero, the reverse. Many traders only trade long above zero and short below it.
  • Strength: above +50 (or below −50) the newer extreme is much fresher than the older one; the trend is established, not just starting.
  • Turns: a cross of zero is the earliest sign; a cross of ±50 is the confirmation. Trading the zero cross alone whipsaws in ranges.
  • Exhaustion: a reading that has sat near +100 and starts stepping down while price still holds says the highs are getting older.
  • Watch out: like Aroon, it measures the timing of the extremes, not the distance travelled, and it moves in steps of 100 / Length. Pair it with price structure or a strength measure such as ADX.

Settings#

SettingDefaultWhat it changes
Length14The window (1 to 5,000). Longer is slower and holds its readings longer.
Colours and style—The Oscillator, Upper level, Zero line and Lower level colours.

Example on gold#

After a two-week pullback from $4,300 to $4,220, gold turns up and the daily Aroon Oscillator (14) crosses from −60 to above zero, then through +50 a few days later as price breaks the pullback high. For example, a trader waits for the +50 cross before buying, because the zero cross happened while price was still inside the pullback range.

What would invalidate it: the oscillator falling back through zero within a few bars, which means price just set a new low for the window; the turn was a bounce, not a new leg up.

Add it to your chart#

  1. Click Indicators in the top strip (on the Pro screen, I does the same).
  2. Type aroon osc and click the indicator.
  3. Click its chip in the legend to open the Inspector and change the settings; drag the chip to reorder; the dot hides it; × removes it.