Vortex Indicator: A Complete Guide to Trend Identification for Binary Options
The Vortex Indicator (VI) is a powerful technical analysis tool developed by Etienne Bots and Justus Visser to identify the start and direction of a trend. The indicator uses two lines — VI+ (green) and VI- (red) — which help to accurately determine trend reversal points. For binary options traders, Vortex is an effective tool for finding early entries into trend movements.
What is the Vortex indicator and how does it work?
The Vortex Indicator consists of two lines that measure the directional movement of the price:
VI+ (green line): Measures upward trend movement
VI- (red line): Measures downward trend movement
Calculation principle: Based on comparing current extremes with previous ones
Formula: Uses True Range and directional movement
The key advantage of Vortex is its ability to identify the beginning of a trend at an early stage, which is especially valuable for binary options.
Vortex trading signals for binary options
1. Intersection of lines VI+ and VI-:
Call signal: The green line VI+ crosses the red line VI- from below
Put signal: The red line VI- crosses the green line VI+ from below
Expiration: 2-5 minutes
2. Divergence of lines:
Strong bullish trend: VI+ is significantly higher than VI-
Strong bearish trend: VI- is significantly higher than VI+
Trend reversal: Convergence of lines followed by intersection
3. Level 0.5 as a filter:
Trend confirmation: Values above 0.5 indicate a strong trend
Weak signal: Values below 0.5 require additional confirmation
Practical trading strategy
Early Trend Entry Strategy:
Wait for the VI+ and VI- lines to cross
Confirm the signal with a candlestick reversal pattern
Enter the trade in the direction of the crossover
Expiration: 1-5 minutes
Trend Movement Strategy:
Determine the direction of the trend based on the position of the lines
Wait for a pullback to the moving average
Enter the trade when the movement resumes
Expiration: 2-5 minutes
Combining with other instruments
To increase the effectiveness of the Vortex Indicator, use it in combination with:
Moving averages (EMA 20/50) - to confirm the trend direction
ADX (14) - to determine the strength of the trend
Support/resistance levels - to accurately determine entry points
Stochastic (5,3,3) - to filter overbought/oversold conditions
Risk management:
Trade size: no more than 2% of the deposit
Profit/risk ratio: 1:2
Trade only when there are clear signals
Maximum daily risk: 5%
Conclusion
Vortex Indicator is a powerful tool for identifying the start and direction of a trend. Its main advantage is its ability to generate early signals of a trend reversal, which is especially important for binary options traders. Correct use of VI+ and VI- line crossovers in combination with other technical analysis tools can significantly improve the accuracy of entries. It is recommended to use Vortex as the main trend indicator in combination with oscillators to filter out false signals.