# Vortex Indicator (VI): Definition, Calculations, Chart Example

![Candlestick chart on a screen showing green uptick and red downtick lines](https://www.investopedia.com/thmb/Bk629mDPnx65aKq-Q6j3k5raLNo=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/VortexIndicatorGettyImages-1584774403-6748b05ca82f4f519cfaab88a3da9e70.jpg)

*— Jira Pliankharom / Getty Images*

## What is the Vortex Indicator (VI)?

A vortex indicator (VI) is an indicator composed of two lines - an uptrend line (VI+) and a downtrend line (VI-). These lines are typically colored green and red respectively. A vortex indicator is used to spot trend [reversals](https://www.investopedia.com/terms/r/reversal.asp) and confirm current trends.

## Understanding Vortex Indicator (VI)

The vortex indicator was first developed by Etienne Botes and Douglas Siepman who introduced the concept in a 2009 edition of “Technical Analysis of Stocks & Commodities.” ﻿﻿﻿The vortex indicator is based on two trendlines: VI+ and VI-.

## Vortex Indicator Calculations

The calculation for the indicator is divided into four parts.

1\. True range (TR) is the greatest of:

*   Current high minus current low
*   Current high minus previous close
*   Current low minus previous close

2\. [Uptrend](https://www.investopedia.com/terms/u/uptrend.asp) and downtrend movement:

*   VM+ = Absolute value of current high minus prior low
*   VM- = Absolute value of current low minus prior high

3\. Parameter length (n)

*   Decide on a parameter length (between 14 and 30 days is common)
*   Sum the last n period’s true range, VM+ and VM-:
*   Sum of the last n periods’ true range = SUM TRn
*   Sum of the last n periods’ VM+ = SUM VMn+
*   Sum of the last n periods’ VM- = SUM VMn−

4\. Create the trendlines VI+ and VI-

*   SUM VMn+/SUM TRn = VIn+
*   SUM VMn-/SUM TRn = VIn−
*   Repeating this process daily forms the VI+ and VI- trendlines.

The traditional application of using VI- and VI+ crossovers can result in a number of false trade signals when price action is choppy. Increase the number of periods used in the indicator to reduce this, for example, using 25 periods instead of 14.

## Inferences

The vortex indicator is commonly used in conjunction with other reversal trend patterns to help support a reversal signal. It is integrated into most [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) software programs. VI+ and VI- are typically graphed independently below a candlestick chart. The chart below provides an example with lines that indicate changing trend signals on a [candlestick](https://www.investopedia.com/terms/c/candlestick.asp) chart.

![Image](https://www.investopedia.com/thmb/mdeMHjDBw-0QQkEnOEgkJ1vKNMM=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_Final_Vortex_Indicator_VI_Jul_2020-01-40a7ffb569324819a458e7637e9912fe.jpg)

**

An uptrend or buy signal occurs when VI+ is below VI- and then crosses above VI- to take the top position among the trendlines. A downtrend or sell signal occurs when VI- is below VI+ and crosses above VI+ to take the top position among the trendlines. Overall, the trendline in the top position generally dictates whether the [security](https://www.investopedia.com/terms/s/security.asp) is in an uptrend or downtrend.

> **Article Sources**
>
> 1.  Technical Analysis of Stocks & Commodities. "[The Vortex Indicator](https://static1.squarespace.com/static/5c2fa05dcc8fed682704b044/t/5dd482e44e4f4212e7a9046b/1574208237438/Vortex+Indicator+Article.pdf)," Page 1. Accessed Sept. 1, 2020.