Vortex Indicator: measuring directional movement between highs and lows

What it measures

The Vortex Indicator measures upward and downward movement by comparing each bar’s high to the previous bar’s low, and each bar’s low to the previous bar’s high. Those two distances describe rotation between buyers and sellers.

It produces two lines whose crossovers mark trend changes, in the same family as directional movement but built on a different measurement.

The difference from directional movement matters. Wilder measures how far each bar extended beyond the previous bar in one direction only, and discards the smaller side. Vortex measures the full span between opposite extremes on both sides, so a bar that both took out the previous high and undercut the previous low registers strongly on each line rather than on neither.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   For each bar, the upward movement is the absolute distance from this high to the previous low, and the downward movement is the absolute distance from this low to the previous high.

2. 2

   Sum each over the lookback period.

3. 3

   Divide each sum by the sum of true range over the same period.

Settings

Fourteen periods is standard. Shorter settings cross far more often and are usually paired with a trend filter, because the indicator has no concept of trend strength of its own — it will cross just as readily in a dead range as in a genuine reversal, and nothing in the two lines distinguishes the two cases.

How to read it

• The lines crossing is the signal: +VI rising above −VI marks an upward turn.
• The width between them measures conviction; converging lines mean the trend is losing definition.
• Both lines near one means neither side has been able to extend against the other.
• A crossover deep inside a range is usually noise; the same crossover with the lines already separated is the one worth reading.

Where it misleads

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