The AroonDown function is part of the Aroon indicator used in financial technical analysis to measure the strength and potential direction of a trend by identifying when lows are occurring within a given period. The Aroon indicator consists of two lines: Aroon Up and Aroon Down. The Aroon Down specifically measures the number of periods since the most recent lowest price was recorded.

Syntax:

AroonDown[N]

Where N represents the number of periods over which the lows are evaluated.

Example:

N = 20
myAroonDown = AroonDown[N]
IF(myAroonDown > 50) THEN
    SIGNAL = 1
ELSE
    SIGNAL = -1
ENDIF
RETURN SIGNAL

In this example, the AroonDown indicator is calculated over 20 periods. If the result is greater than 50, it sets a SIGNAL variable to 1, otherwise, it sets the SIGNAL to -1. This signal could be used to suggest potential trading actions, such as entering or exiting positions based on the trend’s strength.

Interpretation:

• The Aroon Down line measures the number of periods since a price recorded its lowest point, expressed as a percentage of the total periods.
• A higher Aroon Down value indicates a recent low, suggesting a potential downward trend.
• Conversely, a lower Aroon Down value indicates that it has been a longer time since the last low, which might suggest an upward trend.

This indicator is particularly useful for identifying whether a market is trending downwards and how strong that trend is. It is often used in conjunction with the Aroon Up to get a fuller picture of the market’s direction.