Vortex indicator: calculation, crossovers and whipsaws

What the Vortex indicator measures

The Vortex indicator is a trend indicator that Etienne Botes and Douglas Siepman published in Technical Analysis of Stocks & Commodities in January 2010. It builds on the idea of directional movement, and its name comes from the vortex flows of water that inspired its authors. It plots two lines, VI+ for upward movement and VI− for downward movement, and the line on top shows which side has dominated the lookback window.

• Inputs: the high, low and close of each session and of the session before it.
• Lookback: 14 sessions is a common default; the first value needs 15 sessions.
• Units: ratios without a currency; both lines hover around 1.0.
• Cadence: one period per session on a daily chart.

The positive and negative vortex lines

Upward vortex movement, VM+, is the distance from today’s high to yesterday’s low. Downward vortex movement, VM−, is the distance from today’s low to yesterday’s high. When a stock is rising, highs keep reaching well above prior lows and VM+ is large; when it is falling, lows reach far below prior highs and VM− dominates.

VM+ = |High today − Low previous session|
VM− = |Low today − High previous session|
TR = max(High today, Close previous session) − min(Low today, Close previous session)
VI+ = sum of VM+ over n sessions / sum of TR over n sessions
VI− = sum of VM− over n sessions / sum of TR over n sessions

Dividing by the summed true range puts both lines on a common scale, so a volatile stock and a quiet one can be read the same way. In a steady trend the leading line often rises above 1, because each session’s reach from the prior extreme is longer than its own range.

How to calculate the Vortex indicator

Compute VM+, VM− and true range for every session, sum each over the lookback and divide the movement sums by the true-range sum. The example uses 17 hypothetical sessions and a 14-session lookback. It starts after a session with a high of $41.20, a low of $40.30 and a close of $40.50, which serves as the previous session for session 1.

If the true range sums to zero over the lookback, the stock traded at one unchanged price for the whole window, and both ratios are 0 divided by 0. The formula defines no reading there.

How to read the Vortex indicator on a stock chart

The two lines share one pane, usually with a reference line at 1.0. When VI+ is above VI−, upward reach has dominated the window; when VI− is on top, downward reach has. The gap between the lines matters as much as their order: a wide, widening gap describes a persistent move, and lines wound around each other describe indecision.

1. Identify which line is on top and since when.
2. Measure the spread between the lines; a crossing with a tiny spread is weak evidence.
3. Check the price chart for gaps, which inflate one side’s movement for 14 sessions.
4. Compare with the trend on the price chart before giving a crossing weight.

A crossover example

In the worked example, the first full window ends at session 14 with VI− at 1.062 above VI+ at 0.930, reflecting the decline in sessions 1 to 10. As rising sessions replace falling ones in the window, VI+ climbs to 1.008 at session 15 and crosses above VI−, now 0.985. By session 17 the spread has widened to 1.122 against 0.863.

On the hypothetical chart on this page, a similar crossing comes nine sessions after the lowest close, and the lines then separate widely during the advance.

Lookback periods

The lookback sets how many sessions of movement are summed. A short window reacts quickly and crosses often; a long window smooths both lines and crosses rarely, later in each move. Fourteen sessions is a common default, and longer settings such as 21 sessions trade speed for fewer crossings.

Whatever the setting, each reading needs one more session than the lookback, because the first movement value compares a session with the one before it.

Whipsaw signals in sideways markets

When price moves sideways, upward and downward reach are similar, both lines hover near 1.0 and they cross back and forth. Each crossing reverses the previous one within days, which is what chart readers call a whipsaw.

On the hypothetical chart, the lines cross once at the start of the advance and three more times in the shaded sideways stretch, after price has stopped rising.

• Some chart readers require a minimum spread between the lines before treating a crossing as meaningful.
• A longer lookback reduces crossings in a choppy stock, at the cost of later ones in a trend.
• Checking whether price itself is making higher highs or lower lows separates a trend from noise.

Limitations of the Vortex indicator

The Vortex indicator is easy to compute, but its construction leaves several blind spots. They matter most in quiet or gappy markets.

• Lag. Sums over 14 sessions respond to a turn only as new sessions replace old ones.
• Drop-off effects. A large session changes both lines when it enters the window and again when it leaves 14 sessions later.
• Gaps. Absolute distances from the previous high or low make gaps count heavily.
• No fixed extremes. Values above 1 are common in trends, and no standard level marks an overextended move.
• Flat windows. A window with zero true range defines no reading.

Related measures in TradeClever

TradeClever does not plot the Vortex indicator. It does use the same true range in its average true range: ATR(14) and atrPct14 in CleverScan measure how wide a stock’s sessions have been, without the up and down split that the vortex lines add. Daily candles in Stock Charts show the highs, lows and gaps that drive both measures.