The Vortex Indicator is a lower study that plots two lines against each other. These two plots are VI+ (green) and VI- (red). The values of the two plots come from current high and previous low, and current low and previous high. VI+ is the absolute value of current high minus previous low. The VI- is absolute value of current low minus the previous high. Each are then divided by the sum of the true ranges over the period of observation.
The greater positive distance (amount) between the low of one candle and the next candle’s high, the greater the ascending or positive Vortex movement (VI+). Contrarily, the greater the negative distance between the candle’s high and the next candle’s low, the greater the descent or negative Vortex movement (VI-).
The Vortex Indicator is displayed in the graph below. Away from congestion areas, where choppy action skews the study, the VI+ moving and staying over the VI- is bullish and the opposite for the bears.
This indicator can be another great tool traders can look at in order to determine if a breakout or breakdown is in the process or on the horizon.
