The Vortex Indicator is composed of 2 lines that show both positive (VI +) and negative (VI -) trend movement. Etienne Botes and Douglas Siepman are developed by this indicator. Vortex indicator consists of two oscillating lines. In these oscillators, one to identify positive trend movement and the other to identify negative price movement. In the Vortex indicator, Botes and Shipman drew on the work of Welles Wilder and Viktor Schauberger, who is considered the father of implosion technology. This indicator is quite straightforward to understand and easy to interpret. The Vortex indicator a bullish signal triggers when the positive trend indicator crosses above the negative trend indicator or a key level. As the opposite way, a bearish signal triggers when the negative trend indicator crosses above the positive trend indicator or a key level. This indicator is either above or below these levels, which means it always has a clear bullish or bearish bias.
Usage of the Vortex Indicator :
The traders can find the Vortex indicator In the Zerodha Kite platform, under the STUDIES section. It is also available in the Kite mobile App. The Period is 14 and if you can change this value then you can change it. The OverBought is 1.1 and the OverSold is 0.9 you can change these value also. The traders can check how they attached the indicator in Reliance Industries shares price chart. The traders can attach the Vortex indicator on to any charts likes daily, weekly, monthly or intraday.
The Vortex indicator crosses between the lines trigger buy and sell signals. These signals are designed to capture the most dynamic trending action, higher or lower. There are no neutral setting for this indicator, which will always generate a bullish or bearish bias. It has a relatively straightforward application. This indicator is used by traders to identify the start of a trend. The VI + line crossing the VI – line or a key level could be seen as a bullish signal and bearish signal of Vortex indicator. These are key trend change points of this indicator. The indicator is used in combination with other signals.
The Vortex Indicator can be used to identify the start of a trend and subsequently affirm trend direction. The main part of this indicator, a simple cross of the two oscillators can be used to signal the start of a trend. After this crossover, the trend is up when +VI is above -VI and down when -VI is greater than +VI of this indicator. Another part of this indicator, a cross above or below a particular level can signal the start of a trend and these levels can be used to affirm trend direction.
Vortex Indicator Interpretation from Upstox and Fyers
The attached chart is based on the script of GRANULES. Here, I’ve applied the Vortex indicator with the 1-month time frame. Vortex basically identifies the divergence as well as the market trend.
As you can see the particular indicator is composed of two single lines, uptrend and downtrend. Here, the red line reflects the downtrend and the green or blue line shows the uptrend. Basically, the indicator confirms the market trend.
Vortex Indicator Calculations :
The calculation of this indicator :
- Current true range (TR) of Vortex = Maximum absolute value of either (current high–current low), (current low–previous close), (current high–previous close).
- Uptrend and downtrend movement :
Vortex Movement Up (VM+) of Vortex = absolute value of the current high – previous low.
Vortex Movement Down (VM−) of Vortex = absolute value of current low – previous high.
- Parameter length (n) :
The parameter length is between 14 and 30 days which is common.
VM+ and VM- are sum of the last n period’s true range.
SUM TRn = Sum of the last n period’s true range.
SUM VMn+ = Sum of the last n period’s VM+.
SUM VMn− = Sum of the last n period’s VM-.
- Create the trendlines VI+ and VI- :
VIn+ = SUM VMn+/ SUM TRn.
VIn− = SUM VMn-/ SUM TRn.
Repeating this process daily forms the VI+ and VI- trend lines.
The Vortex Indicator is one of the unique directional indicators. This indicator provides clear signals and defines the overall trend. In all technical analysis tools and indicators, the Vortex indicator can be used on a range of securities and across various time frames. In an example, this indicator can be applied to weekly and monthly charts to define the bigger trend. Also, then applied to daily charts to generate signals within that trend. Using the daily chart, the traders are could focus exclusively on bullish signals when Vortex indicator on the weekly chart indicates an uptrend. Mainly, the traders are can focus on bearish signals when this indicator on the daily chart is in bear mode.
Categories: Technical Indicators