Arun oscillator can be used to define trend direction and strength. Besides, it can detect a trend turning into flat.
The oscillator's values are ranging between -100 up to +100 with a 0 as a median line. The signals can be interpreted the following way:
- The oscillator exceeding 50 signals a strong upward trend;
- The oscillator falling below -50 shows a downward trend;
- If the tool oscillates near 0, the market is flat;
- The oscillator falling below 50 means that the upward trend is consolidating and the reversal is to occur soon;
- The longer the oscillator stays aroind 0, the more reliable is flat;
- If the oscillator moves from 0 to -50, the downtrend starts. The tool remaining below -50 means that the market is in a strong downward trend.
The oscillator allows traders to define the best moments for applying trend indicators (such as Moving Averages) and stochastic oscillators.