Hello everyone, hope you all are doing good? I'm back with the Part 2 of this amazing series, Understanding Aroon Indicator. If you haven't read the Part 1, I strongly suggest you do that by clicking here. In today's article, we would be understanding the Aroon Oscillator & how it works and how to detect a market trend and strength.
The Aroon Oscillator isn't same with Aroon indicator, as it is the difference between the Aroon-Up and Aroon-Down. The Aroon indicator ranges between 0 - 100 but the Aroon Oscillator ranges between -100 to 100.
The Aroon Oscillator does the same function of the Aroon indicator, as they both help traders predict market trends and strength of the market. But the Aroon Oscillator has a better parameters that helps traders know the strength of a market.
If Aroon Oscillator is -50 and lower, it indicates a strong bearish trend and if the Aroon Oscillator is 50 and above, it indicates a strong bullish trend. Lastly, if the Aroon Oscillator is 0, it indicates that the market is consolidating. With some images below, you will have more understanding of the Aroon Oscillator.
As you can see from the image above, whenever Aroon Oscillator is above 50, there's a bullish trend and whenever it below -50, there's a bearish trend.
How To Detect A Market Trend & Strength
Whenever the Aroon oscillating line is at +50 and -50, it signify the market trend and market strength.
If the Aroon oscillating line is moving upwards towards +50, it signifies a bullish trend and once it is over +50, it signifies a strong bullish trend. That is a buy signal for traders. Take a look at the image below for more understanding.
If the Aroon oscillating line is moving downwards towards -50, it signifies a bearish trend and once it is over -50, it signifies a strong bearish trend. An opportunity for traders to sell. Take a look at the image below for more understanding.