Vortex Indicator
A 2010 indicator that borrows from fluid dynamics — measuring upward and downward motion as two separate currents, and reading the market by the direction in which the vortex is winding.
Overview
The Vortex Indicator (VI) is a relatively recent addition to the trend-direction family, introduced by Etienne Botes and Douglas Siepman in Technical Analysis of Stocks & Commodities in 2010. Both the name and the underlying intuition come from fluid dynamics: when one direction of price motion dominates the other, the market is, in the authors' metaphor, winding into a vortex — and you can detect the winding by measuring the dominant current against the subordinate one.
The indicator draws two lines. VI+ tracks the strength of upward motion; VI− tracks the strength of downward motion. Both oscillate between roughly zero and 1.5. Reading the indicator is a matter of comparing the two — which one is on top, how widely they have separated, and when they cross.
The structure resembles the +DI/−DI lines that accompany Wilder's ADX. The resemblance is real, the underlying ideas are close, but the calculation differs in a specific way that gives the Vortex its own behavioural signature. The Vortex Indicator is not as widely deployed as ADX, but a steady minority of traders use it either as a supplement to or a substitute for the DI lines.
Standard period: 14.
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