What it is
It condenses the two Aroon lines into one number. Where Aroon shows both sides separately, the oscillator shows only which side is winning and by how much, which is quicker to read and easy to use as a filter.
A reading of +100 means price made a new high on this candle and the lowest low was a full 25 candles ago: a very clean uptrend. Readings near 0 mean highs and lows are equally fresh, which usually means a range.
How it is calculated
1. Work out Aroon Up: 100 x (25 minus candles since the highest high) / 25. 2. Work out Aroon Down: 100 x (25 minus candles since the lowest low) / 25. 3. Aroon Oscillator = Aroon Up minus Aroon Down.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Length | 25 | 2 to 200 | How many candles to look back. Shorter reacts to new trends sooner but crosses 0 more often. |
How to read it
How to trade it
- 1
Use it as a direction filter on a 1 hour gold chart: only look for longs above +50, shorts below -50.
- 2
Within that filter, wait for a pullback to a key level or a short moving average on the 15 minute chart.
- 3
Enter on a bullish candle closing off the level.
- 4
Stop beyond the pullback low, for example 6 to 10 points on gold.
- 5
Exit if the oscillator falls back below 0, or at 2 times the stop.
The trend-following long is cancelled once the oscillator closes below 0, or price closes below the pullback low.
WickSpeak writes a plain-English reading of the Aroon Oscillator on the live candle: what it is, whether highs or lows are the fresher side right now, how to trade it and what would prove it wrong. In Playbook, a condition can check when the oscillator crosses above or below zero, stays above or below zero, or is rising or falling, which makes a simple 'trend is fresh' filter for other plays.
Best markets and timeframes
Best on 1 hour to daily charts as a trend filter for gold, US30, NAS100 and forex majors. On the 1 to 5 minute charts it flips too often to filter well.
Common mistakes
- Treating a cross of 0 as a strong signal on its own. It often happens many times in a range.
- Expecting it to show the size of a trend. It only measures timing of highs and lows.
- Using too short a setting, which makes the line jump between +100 and -100.
Works well with
Questions traders ask
What is the Aroon Oscillator?
It is Aroon Up minus Aroon Down. It runs from -100 to +100 and shows which side, highs or lows, has been made more recently.
What is a strong Aroon Oscillator reading?
Above +50 is usually taken as a firm uptrend and below -50 as a firm downtrend. Readings near 0 suggest no clear trend.
Should I use Aroon or the Aroon Oscillator?
The oscillator is quicker to read and suits filters. The two-line Aroon shows more, for example both lines falling together in a range, which the oscillator can hide.
What period should the Aroon Oscillator use?
25 is the standard. Some traders drop to 14 on intraday charts, accepting more false crosses for earlier signals.