The Vortex and the Vortex Iceberg indicators
New Concepts in Technical Trading Systems
is the title of the trading book by Douglas Siepman and Etienne Bote. In this book, they present, among other things, their Vortex technical analysis indicator. The indicator is used to identify a new trend and to indicate whether an existing trend is continuing.
How does the Vortex indicator work?
The Vortex is an oscillator. Simply put, it is an indicator that goes up and down. The Vortex consists of two lines. A green line, the positive VI+, and a red line, the negative VI-. For Siepman and Bote, if VI+ is above VI-, there is a positive, bullish trend. Conversely, if VI- is below VI+, the trend is negative.
This example shows the green VI+ line and the red VI- line of Vortex technical analysis indicator.
The Vortex Iceberg indicator
The Vortex Iceberg indicator is conceptually the same as the Vortex but the visual representation is different. Traders use only the tops and crosses with the midline. Therefore, the indicator is shown as icebergs protruding above the sea, the midline.
This example shows the Vortex Iceberg indicator with the positive VI+ and the negative VI- icebergs.
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If the VI+ rises above the VI-, this is interpreted by traders as a confirmation of a trend that started a while ago. These crosses are often around the mid-line.
This example shows confirmation of the positive trend. The VI+ rises above the VI-. This is a positive signal. The trend is indeed continuing. The market is going up. As usual in NanoTrader, the buy signal is indicated by the vertical, green background.
This example shows confirmation of a negative (bearish) trend. The VI+ drops below the VI-. After a short hesitation, the negative trend continues. The short sell signal is indicated by the red, vertical background.
Overbought and oversold signals
When the top of the iceberg enters the extreme zone, it is possibly a sign that the trend is coming to an end. If it is a rising trend, traders say the market is over-bought. If it is a falling trend, they speak of oversold.
This example shows both a negative trend and a positive trend coming to an end. If the VI- or the VI+ drops back below the extreme zone, this is a signal.
The Vortex and Vortex Iceberg indicators in the trading platform
1. Open the chart of the instrument you wish to trade.
2. In the WHS Proposals folder, select the Indicators folder and select Vortex or Vortex Iceberg.
3. If desired, change the settings in the Designer Dialog window.
4. Activate TradeGuard+AutoOrder or AutoOrder to trade (semi-)automatically.