Vortex Indicator: Directional Movement and Trend Changes

Summary

The document introduces the Vortex indicator through its relationship to Wilder’s Directional Movement Index. It explains directional movement by comparing each bar’s high and low with the prior bar: upward movement measures extension above the previous high, while downward movement measures extension below the previous low. For inside bars, both movements are zero; when both directions are possible, the smaller movement is discarded.

Summing positive and negative movement over a chosen lookback produces two series. Their relative size is used to infer directional bias; crossings may signal a possible trend change, while increasing separation is presented as a sign of strengthening trend. The article credits the DMI concept as inspiration for Vortex and says the indicator can be applied across timeframes. The document provides no calculation details specific to Vortex, charts, backtest results, or rules for entries and exits. Its broad claim of reliable trend identification is therefore not supported here by evidence, and users would need to assess performance and whipsaw risk on their own markets and timeframes.

Key ideas

• The Vortex indicator is presented as an outgrowth of Wilder’s directional movement framework.
• Positive and negative movement compare the current bar’s extremes with the previous bar’s extremes.
• Inside bars contribute zero movement in both directions, and the smaller competing movement is discarded.
• Lookback sums form two directional series whose relative size and crossings are used to assess trend direction and possible changes.
• The document offers no Vortex-specific formula or empirical test to establish reliability.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.