Vortex Indicator — VI+ / VI−
Developed by Etienne Botes and Douglas Siepman in 2010, the Vortex Indicator isolates trend reversals by drawing inspiration from the vortex movements observed in nature. Rather than measuring the strength of a move like the ADX, the Vortex directly contrasts two components — VI+ (bullish vortex) and VI− (bearish vortex) — whose crossovers identify the moment when dominant pressure flips. It is a reversal timing tool, complementary to oscillators (RSI, KST) that capture exhaustion.
Definition and formula
The Vortex compares the usual True Range (TR) to two "vortex movements" (VM) calculated through differences of successive highs/lows:
VM− = |Low(t) − High(t−1)|
VI+ = Σ VM+ / Σ TR (over 14 periods)
VI− = Σ VM− / Σ TR (over 14 periods)
VI+ and VI− typically oscillate between 0.6 and 1.3. Their sum stays close to 2.0 by construction — convergence of VI+ and VI− signals consolidation, divergence signals a clear directional move.
How to read the Vortex
VI+ / VI− crossovers
- VI+ crosses above VI−: buy signal. Bullish pressure becomes dominant. Ideally confirmed by rising volume and ADX > 20.
- VI− crosses above VI+: sell signal / long exit. Bearish pressure dominant.
- VI+ and VI− close (gap < 0.05): consolidation phase, wait for the next clear impulse.
- Widening VI+/VI− gap: trend amplifying, reinforced directional signal.
Notable levels
- VI+ > 1.1: bullish trend already well established. Better entry points on pullbacks rather than the initial crossover.
- VI− > 1.1: confirmed bearish trend. Avoid longs without an additional reversal signal.
- VI+ and VI− between 0.85 and 1.05: range/indecision. The Vortex has no usable directional information.
How Cash Scanner uses the Vortex
The Vortex enters the /100 score via the binary signal vi_trend_up:
- VI+ > VI− activates
vi_trend_up = 1. Significant score bonus in Momentum Mode, contributes to "confluence" with RSI, MACD, 20-day breakout. - Momentum Mode: a recent VI+ crossover above VI−, combined with an RSI exiting oversold and a bullish MACD, triggers strong confluence (3-4 signals) adding a 5-15 point score bonus.
- Phoenix Mode: Phoenix instead rewards ends of bearish trends — a VI+ moving back above VI− after a long period of VI− dominance is a valuable reversal signal, complementary to RSI/MACD divergences.
- Displayed as a "Vortex↑" badge on opportunity cards in the dashboard.
Limits and common pitfalls
- False signals in tight ranges: with VI+ and VI− oscillating between 0.9 and 1.1, repeated crossovers have no predictive value. Always filter with the ADX (> 20) to validate that there is a trend to capture.
- Default 14 periods: swing-trading optimum. Reducing to 7 makes it very reactive but noisy (useful for day trading). Increasing to 21 or 28 makes it more stable (position trading).
- The Vortex does not measure strength, only direction. A crossover with VI+ at 1.02 and VI− at 1.01 is worth much less than one with VI+ at 1.20 and VI− at 0.85 (clear move).
- Intrinsic lag: 14 smoothing periods = signal arriving 2-3 days after the actual price reversal. Complement with leading indicators (divergences, volume) to anticipate.