When describing Vortex in simple words, one should mention that it is a popular oscillator. The abbreviation VI is used to refer to a vortex indicator. It is 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 and confirm current trends. The indicator is often been used on binary options, as it is able to quickly respond to changes in the current market situation and generate reliable signals.
The vortex indicator is based on two trend lines: VI+ and VI-. It is relatively a new tool developed by Etienne Botes and Douglas Siepman in 2010 edition of “Technical Analysis of Stocks & Commodities”. Fortunately, the Pocket Option broker platform offers the indicator in the standard set. Look at the screenshot and find out how to activate Vortex in the list of standard advisors.
First, the vortex indicator was used to in the foreign exchange market and then it was adopted to binary options trading, where it helped improve the high efficiency and reliability of its signals.
How does Vortex looks and how to set it?
Consisting of two signal lines and key levels, the Vortex indicator looks just like all other oscillators. In the Pocket Option terminal you will find Vortex under the price chart.
Line VI+ (green) is called an “uptrend”. It is calculated as absolute value of current high minus prior low.
Line VI- (red) is called a “downtrend” . It is calculated as absolute value of current low minus prior high.
The calculation for the indicator is divided into four parts: True range (TR), uptrend and downtrend movement, parameter length (14 and 30 days is common), the trend lines VI+ and VI-.
The formula allows for the correction. In the end, the indicator determines the current mood of sellers and buyers.
From the mathematic point of view, the formula is complicated but software makes it easy. You do not need to do calculations manually. Just install the indicator and set the parameters.
Regardless of which timeframe, the creators of Vortex recommend using the period of 14. If you want to set the VI in Pocket Option, you should go to the “Indicators/Active” menu and click on the pencil icon. You will see the settings.
Tips on trading binary options with Vortex
The Vortex Indicator is simple and easy to use. The signal to buy is the crossover of the line.
It is recommended to buy the CALL option immediately after the green line crosses the red line from bottom to top.
It is recommended to buy the PUT option when the red line crosses the green line from bottom to top.
General recommendations for the trading with Vortex Indicator:
- Trade during periods of high volatility;
- Use currencies or “crypto” as an asset;
- The expiration period should more than formation of 3 candles;
- Do not use it with shorter timeframe (less then 5 minutes).
Keep in mind, that 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.
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 software programs. VI+ and VI- are typically graphed independently below a candlestick chart. The chart higher provides an example with lines that indicate changing trend signals on a candlestick chart. Most traders use Vortex in combination with the Martingale principle. They also prefer to use the Vortex Indicator in combination with other tools to generate more accurate signals.
