Vortex Indicator

Notes:

These indicators and concepts are specifically designed for TradingView.com

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Overview

The Vortex Indicator is a technical analysis tool used to identify trends and their direction. It consists of two lines, the Positive Vortex Indicator (VI+) and the Negative Vortex Indicator (VI-) that measure the strength of bullish and bearish trends.

How to Trade

Here are some ways to use the Vortex Indicator in trading:

1. Trend Identification: The Vortex Indicator can be used to identify the direction of a trend. When the positive line is above the negative line, it indicates a bullish trend, and when the negative line is above the positive line, it indicates a bearish trend.
2. Trend Reversals: The Vortex Indicator can also be used to identify potential trend reversals. When the positive line crosses above the negative line, it can indicate a potential bullish trend reversal, and when the negative line crosses above the positive line, it can indicate a potential bearish trend reversal.
3. Entry and Exit Points: Traders can use the Vortex Indicator to identify potential entry and exit points in a trade. For example, when the positive line crosses above the negative line, it could signal a potential buy entry point, and when the negative line crosses above the positive line, it could signal a potential sell exit point.
4. Confirmation: The Vortex Indicator can also be used as a confirmation tool in conjunction with other technical indicators. For example, if a trader sees a bullish crossover on the Vortex Indicator and a bullish crossover on the MACD, it could confirm a potential bullish trend.

How to Calculate

The Vortex Indicator is calculated using two lines - the Positive Vortex Indicator (+VI) and the Negative Vortex Indicator (-VI).

The Positive Vortex Indicator is calculated as follows:

+VI = Current True Range (TR) + Previous Day's Positive TR

The Negative Vortex Indicator is calculated as follows:

-VI = Current True Range (TR) + Previous Day's Negative TR

Where:

• TR = The absolute value of the difference between the current day's high and low.
• Positive TR = The absolute value of the difference between the current day's high and the previous day's close.
• Negative TR = The absolute value of the difference between the current day's low and the previous day's close.

Once you have calculated the +VI and -VI, you can calculate the Vortex Indicator (VI) as follows:

VI = Absolute value of (+VI / -VI)

The VI line oscillates between values of 0 and 1, and can be plotted on a chart as an indicator. Generally, values above 0.8 indicate a strong bullish trend, while values below 0.2 indicate a strong bearish trend. Values between 0.2 and 0.8 suggest a weak or neutral trend.