It is a technical indicator for identifying new or existing trends in the market. Introduced by Swiss market technicians Etienne Botes and Douglas Siepman, the Vortex indicator uses historical price data to predict trends in stock and commodity prices.
In This Article
What is Vortex?
How To Analyse Chart Using the Vortex
Category
Trend
Type
Lagging
Since 2010, the Vortex has gained traction as a reliable trend-following indicator that produces accurate buy and sell signals. Traders use it to spot trend reversals and confirm ongoing trends with a pair of oscillating lines. While one of the lines captures positive trend movement, the other uses negative trend movement. When constructed as part of this indicator, the two lines intersect to produce a Vortex shape. This indicator is best used in conjunction with other indicators to spot patterns and support reversal signals. Despite a rather involved formula, it’s rather easy to interpret Vortex.
The two indicator lines in this trend indicator represent the upward and downward movements. When analysing the vortex trend, the downward trends are called negative Vortex. Conversely, the positive trends are referred to as positive Vortex.
When the positive Vortex crosses the negative Vortex and remains on top, it is indicative of potential upward price momentum. Traders see this as a buy signal. In contrast, when the negative Vortex crosses the positive Vortex and remains on top, it is indicative of potential downward price momentum. Traders view this as a signal to sell.
Generally, the indicator line, whether positive or negative, that remains on top indicates if a stock is experiencing an upward or downward trend.