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Key Takeaways
- VI+ and VI− are nonnegative ratios built from distances between opposite extremes of adjacent bars. Either ratio can equal zero.
- Each line divides its n-period sum of directional movement by the n-period sum of true range, which puts both lines on a comparable scale across instruments and price levels.
- VI+ above VI- describes upward directional pressure and VI- above VI+ describes downward pressure, so the crossover of the two lines is the primary signal.
- Both lines share a positive true-range denominator, so their crossover depends on the ordering of their two movement sums. A level of 1 means that line’s numerator equals summed true range.
- Etienne Botes and Douglas Siepman published the indicator in the January 2010 issue of Stocks and Commodities, building on the directional movement concept from J. Welles Wilder.
- Vortex records both opposite-extreme distances. Wilder directional movement instead keeps a positive winning same-side extension, with zero for the other direction and for ties.
What is the Vortex Indicator?
The Vortex Indicator is a trend indicator that plots two lines, VI+ and VI−, built from the distances between each bar’s extremes and the opposite extremes of the preceding bar. Each line divides its rolling movement sum by summed true range, and VI+ above VI− describes upward directional pressure. Etienne Botes and Douglas Siepman introduced the indicator.
How is the Vortex Indicator calculated?
VM+ = |current high − previous low|. VM− = |current low − previous high|.
Sum each distance over the chosen lookback, commonly 14 bars, and divide by summed true range over those same bars. True range = max(current high, previous close) − min(current low, previous close).
Formula
VM+ = |High(t) − Low(t−1)|; VM- = |Low(t) − High(t−1)|; VI+ = sum(VM+, n) / sum(TR, n); VI- = sum(VM-, n) / sum(TR, n)- VM+ is positive vortex movement, the absolute distance from the current bar high to the prior bar low.
- VM- is negative vortex movement, the absolute distance from the current bar low to the prior bar high.
- TR is Wilder true range, the greatest of the current high minus the current low, the absolute distance from the current high to the prior close, and the absolute distance from the current low to the prior close.
- n is the lookback in bars, commonly 14, applied as a simple rolling sum rather than a Wilder-smoothed average.
- The ratios require positive summed true range. They are nonnegative and use 1 as a reference level, rather than a fixed 0-to-100 scale.
Vortex Indicator example: a bullish crossover
A trader runs a 14-period Vortex Indicator on the daily bars of a stock that slid for three weeks and is now basing. On the session in question the bar prints a high of $44.80 and a low of $43.80, against a prior bar with a high of $44.10, a low of $42.90, and a close of $44.00.
- VM+ = |$44.80 − $42.90| = $1.90, and VM- = |$43.80 − $44.10| = $0.30
- TR = max($44.80 − $43.80, |$44.80 − $44.00|, |$43.80 − $44.00|) = max($1.00, $0.80, $0.20) = $1.00
- Rolling 14-bar sums through this bar: sum VM+ = $15.80, sum VM- = $13.70, sum TR = $14.60
- VI+ = 15.80 / 14.60 = 1.082 and VI- = 13.70 / 14.60 = 0.938
- On the prior bar the same sums produced VI+ = 0.987 against VI- = 1.020
VI+ is 1.082 and VI− is 0.938, reversing their previous ordering and creating the bullish crossover. Their difference is 2.10 / 14.60 = 0.14. The positive shared denominator preserves the ordering of the $15.80 and $13.70 movement sums.
VI+ = 15.80 / 14.60 = 1.082. VI− = 13.70 / 14.60 = 0.938. VI+ now leads after trailing on the preceding bar.
How to read VI+ and VI−: leadership, level and separation
The denominator must be positive. Since both ratios share it, VI+ leads exactly when summed VM+ exceeds summed VM−. The crossover therefore follows the ordering of the numerators.
A line at 1 means its movement sum equals summed true range. Both lines can exceed 1 at the same time. Their sum is not fixed near 2: the sizes of the adjacent ranges and the bars at the window boundaries matter.
The gap between the lines is the difference of the movement sums divided by summed true range. A larger normalized gap can come from a larger numerator difference, a smaller denominator or both.
Vortex Indicator vs ADX, DMI and Aroon
Vortex uses both absolute distances on every bar. Wilder’s directional indicators use positive same-side extensions, resolving ties to zero and applying Wilder smoothing.
Aroon measures ages of extremes. ADX smooths directional imbalance. Give each measure its own job in the rule: Vortex for which side leads, ADX for trend strength and Aroon for the age of the latest extremes.
How traders use Vortex crossovers
Choose the Vortex crossing, decision bar and price event. For example, evaluate bullish line leadership alongside a completed close above a defined resistance level. Set entry, invalidation, size and exit explicitly.
The chart’s separate example crosses at bar 8: VI+ moves from 0.972 to 1.021 while VI− moves from 0.986 to 0.924. Show both lines so the event is immediately visible. Pair the crossover with Options Flow: calls bought at the ask as VI+ takes the lead support the bullish read, and the Options Profit Calculator prices each structure at the target, expiration and volatility you set.
Limitations of the Vortex Indicator
- Confirm the crossover with price. Both lines are built from rolling sums of past bars, so a crossover arrives after movement has shifted, and a bar leaving the window can move the lines as much as a new one.
- Require a separation threshold when the lines run close. When upward and downward movement are similar, the two sums stay close and the lines can cross back and forth.
- Judge trend strength with a second tool such as the ADX. A crossover shows which movement sum leads, and a wider gap can come from a smaller true-range sum rather than more directional movement.
- Match the lookback, bar interval and session before you compare signals; each one changes the sums.
- Read the level 1 as a reference, not a bound. Both lines can sit above it at once, and the crossover gives the signal.
Bottom line
The Vortex Indicator compares upward and downward movement between adjacent bars, scaled by true range, and its crossover shows which side leads. Declare the lookback and session, pair the crossover with a price event such as a close above resistance, and set the entry, stop and exit before acting on it.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Stocks and Commodities V. 28:1 (20-30): The Vortex Indicator by Etienne Botes and Douglas Siepman
- thinkorswim (Schwab) Learning Center: Vortex Indicator Study
- Fidelity Learning Center: Directional Movement Index (DMI)
- Fidelity Learning Center: Average True Range (ATR)
How entries are sourced, calculated and updated: editorial methodology.