Vortex Indicator
Overview
The Vortex Indicator consists of two oscillating lines — VI+ (positive trend movement) and VI- (negative trend movement) — that capture the directional movement of price through the relationship between the current high and prior low, and the current low and prior high. Crossovers between these lines signal trend changes and provide entry and exit timing for trend-following strategies across any market.
Key Concepts
VI+ measures upward trend movement by comparing the current high to the prior low. VI- measures downward trend movement by comparing the current low to the prior high. Both lines are normalised by the true range sum over the lookback period. A VI+ crossing above VI- signals a bullish trend change. A VI- crossing above VI+ signals a bearish trend change. The indicator was inspired by the positive and negative vortex movements found in water flow dynamics.
Entry Signals
Enter long when VI+ crosses above VI- from below, indicating a shift to bullish momentum. Enter short when VI- crosses above VI+ from below, indicating a shift to bearish momentum. Confirm crossovers with a close above or below a key moving average for additional conviction. Use the spread between VI+ and VI- as a measure of trend strength — wider spread indicates stronger trend.
Exit Signals
Exit long positions when VI- crosses back above VI+, signalling the bullish trend is ending. Exit short positions when VI+ crosses back above VI-, signalling the bearish trend is ending. Tighten stops when the spread between the two lines begins to narrow. Exit if the crossover occurs without follow-through within a few periods.
Best Timeframes
Daily, Weekly
Pro Tips
The Vortex Indicator is most effective in markets that exhibit clear trending behaviour and produces many false signals in choppy, range-bound conditions. Apply a trend filter from a higher timeframe to reduce whipsaws — only take bullish crossovers when the weekly trend is up, and bearish crossovers when the weekly trend is down. The default twenty-one-period lookback can be adjusted to suit different trading styles.
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