The Vortex Indicator (VI) is a technical indicator that was developed by Etienne Botes and Douglas Siepman in the early 2010s. It is used to identify trends and generate trading signals.
The Vortex Indicator is calculated by taking the difference between the high and low prices of a security over a specified period of time. The result is then divided by the difference between the high and low prices of the security over the same period of time. This is known as the positive vortex indicator (VI+), and the negative vortex indicator (VI-). The positive vortex indicator is calculated for upward movements and the negative vortex indicator is calculated for downward movements.
The Vortex Indicator generates a buy signal when the positive vortex indicator (VI+) crosses above the negative vortex indicator (VI-), and generates a sell signal when the VI+ crosses below the VI-. Traders also use the signal line, which is the moving average of the VI, as an additional confirmation for the signals.
It's important to note that the Vortex Indicator is a trend-following indicator, which means that it is based on the direction of the security's price and not on the actual price level. It's a lagging indicator, which means that it is based on past price data and may not always provide accurate predictions about future price movements. As with any indicator, it is best to use the Vortex Indicator in conjunction with other indicators and analysis techniques to confirm signals and get a better understanding of the market conditions. Traders should also pay attention to the settings of the indicator, such as the period of the moving average, in order to adjust the indicator to the volatility of the market.
In conclusion, The Vortex Indicator (VI) is a technical indicator that was developed by Etienne Botes and Douglas Siepman, it's used to identify trends and generate trading signals. It's calculated by taking the difference between the high and low prices of a security over a specified period of time, and then divided by the difference between the high and low prices of the security over the same period of time. It generates a buy signal when the positive vortex indicator (VI+) crosses above the negative vortex indicator (VI-), and generates a sell signal when the VI+ crosses below the VI-. Traders also use the signal line, which is the moving average of the VI, as an additional confirmation for the signals. It's a trend-following indicator, it's a lagging indicator based on past price data, so it may not always provide accurate predictions about future price movements. Traders should use it in conjunction with other indicators and analysis techniques, pay attention to the settings of the indicator, such as the period of the moving average, in order to adjust the indicator to the volatility of the market and make more accurate predictions about future price movements.