Vortex Indicator

Name Type Prerequisite Use Cases
Vortex Indicator (VI) Trend OHLC Data Spotting trend reversals and identifying current trend direction.

Definition

The Vortex Indicator (VI) consists of two lines: VI+ (positive trend movement) and VI- (negative trend movement). It identifies the start of a new trend and defines the current trend direction. It is inspired by the flow of water (vortices).

Mathematical Equation

It compares the distance between the current high and previous low (positive movement) versus the current low and previous high (negative movement), summed and normalized over a period.

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: 0
  • Behavior: Oscillates based on the intersection of positive and negative trend lines.

Visualization

Vortex Indicator

Trading Significance

  1. Crossovers:

    • Buy: VI+ crosses above VI-.

    • Sell: VI- crosses above VI+.

  2. Trend Strength: The wider the gap between VI+ and VI-, the stronger the trend.