Vortex Trend Tracker 2.0 + RSI
The Vortex Indicator may seem complex, but it is essentially composed of an uptrend line and a downtrend line. It can be used to track trend strength, anticipate reversals, and generate entry and exit signals. The calculation for the indicator is provided in the open-source code below.
To minimize false signals produced by the indicator, we incorporated an Exponential Moving Average of vmPlus and vmNegative values with a default length of 10. Reducing this length would result in a more responsive vortex, but at the cost of increased false signals.
The chart displays the absolute value of the difference between the uptrend and downtrend lines as the main histogram. If the uptrend line surpasses the downtrend line (indicating positive movement), the histogram bars will be either light green or dark green. Dark green bars indicate that the uptrend has just crossed over the downtrend line or is increasing in strength. If the uptrend line is greater than the downtrend line but decreasing, then the bars will be light green. This indicates that the upward trend is losing strength.
Conversely, if the downtrend line is greater than the uptrend line, indicating a negative trend, the bars will be either red or light red. A red bar signifies that the downtrend line has only recently crossed the uptrend line or is increasing in value. Light red bars indicate that the downtrend is weakening despite being greater than the uptrend line.
One way to trade using the Vortex is to go long when the bar color changes from red to light red, suggesting that the downtrend is weakening and an upward reversal is likely to occur soon. Traders can then exit their long position when the bars change from dark green to light green since that implies that the uptrend is losing momentum and prices are unlikely to continue rising.
Traders can also choose to have the uptrend and downtrend lines plotted in the input menu to facilitate visualizing the Vortex's usefulness in identifying reversals.
To minimize false signals produced by the indicator, we incorporated an Exponential Moving Average of vmPlus and vmNegative values with a default length of 10. Reducing this length would result in a more responsive vortex, but at the cost of increased false signals.
The chart displays the absolute value of the difference between the uptrend and downtrend lines as the main histogram. If the uptrend line surpasses the downtrend line (indicating positive movement), the histogram bars will be either light green or dark green. Dark green bars indicate that the uptrend has just crossed over the downtrend line or is increasing in strength. If the uptrend line is greater than the downtrend line but decreasing, then the bars will be light green. This indicates that the upward trend is losing strength.
Conversely, if the downtrend line is greater than the uptrend line, indicating a negative trend, the bars will be either red or light red. A red bar signifies that the downtrend line has only recently crossed the uptrend line or is increasing in value. Light red bars indicate that the downtrend is weakening despite being greater than the uptrend line.
One way to trade using the Vortex is to go long when the bar color changes from red to light red, suggesting that the downtrend is weakening and an upward reversal is likely to occur soon. Traders can then exit their long position when the bars change from dark green to light green since that implies that the uptrend is losing momentum and prices are unlikely to continue rising.
Traders can also choose to have the uptrend and downtrend lines plotted in the input menu to facilitate visualizing the Vortex's usefulness in identifying reversals.