Crypto Academy / Season 3 / Week 6 - Homework Post for [@asaj] // Vortex Indicator

Hello crypto Prof @asaj !

I am Highly pleased to be part of this week's crypto academy task , infact i have learnt a lot about Vortex indicator and how to use them.

below is my submition to this week homework task :

1. In your own words explain the vortex indicator and how it is calculated

Vortex indicator is an indicator with two oscillating lines which are used to determine uptrend and downtrend movement, at certain point the crosses between the lines show’s up a change in trend.
During the 2009 edition of Technical Analysis of stocks & commodities two traders and expert in the industry by name Etienne Botes and Douglas Siepman presented the Vortex Indicator. This indicator has two lines usually green and red they use previous price data to predicts future price , it does so by using price bar which is the highest price and lowest price of a coin over a period of time.

This indicator has no neutral setting so therefore it will either be in a bullish or bearish trend , the indicator line are manipulated from the last N-periods where by N refers to the number of period you are using.
the distance between the current high and the prio low is usually considered as a positive trend movement while between the current low and the prior high stands for a down trend movement.

usually a trader can choose to use any periods preferrably good for the kind of coins he/she wants to trade , the indicator also has a default period which most traders use also which is 14 periods.

Vortex Indicator’s calculation is done in four different ways as shown below:

• The greatest of :
  1.) Current High – Current Low
  2.) Current High – previous Close
  3.) Current low – previous Close
  The above calculation is used to determine the True Range (TR)

• Calculation of Trends ;
  1.) Uptrend Movement (+VI) = Value of current High – Prior Low
  2.) Downtrend Movement (-Vi) = Current Low – Prior High

• Length of the Period : this is use to determine the period used to calculate the trend lines length
  1.) Uptrend (+VI) + Down Trend ( -VE) of the last n Period
  2.) Addition of the last N-periods true range
  3.) Add up all the Uptrends (+VI ) value of the last N-periods
  4.) Add up all the downtrend (-VI ) of the last N-periods

• Calculation to create trends line

UPTREND

1.) Sum of the value of the current high – prior low all divided by True range value of the same N-periods

DOWNTREND

1.) Sum od value of the current low – prior high all divided by true range value of the last N-periods.

For clarity sake I have added to this post as shown below shortcut to understand the procedures :

1. True range (TR) is the greatest of:
   • Current high minus current low
   • Current high minus previous close
   • Current low minus previous close
2. Uptrend and downtrend movement:
   • VM+ = Absolute value of current high minus prior low
   • VM- = Absolute value of current low minus prior high
3. Parameter length (n)
   • Decide on a parameter length (between 14 and 30 days is common)
   • Sum the last n period’s true range, VM+ and VM-:
   • Sum of the last n periods’ true range = SUM TRn
   • Sum of the last n periods’ VM+ = SUM VMn+
   • Sum of the last n periods’ VM- = SUM VMn−
4. Create the trendlines VI+ and VI-
   • SUM VMn+/SUM TRn = VIn+
   • SUM VMn-/SUM TRn = VIn−
   • Repeating this process daily forms the VI+ and VI- trendlines.

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Is the vortex indicator reliable? Explain

After the launch of this indicator in 2009 it gain name in 2010 since then it has been known to be a reliable indicator due to it trend following correct signals, it provides accurate buy and sell signals.
With Vortex when the period is lengthen it reduces the chance of seeing quick rend reversal while when the period used is shorten it gives so many point of cross-over and some turn-out to be fake.

In crypto trading we can’t fully justify that an indicator is 100%, it will take few time to fully understand and evaluate weather this indicator is potentially accurate.
But using the Vortex Indicator with other Tools will help you secure a good trend.

How is the vortex indicator added to a chart and what are the recommended parameters?

• First of all open a coin that you want to trade, let say I open my Binance and select Steem/BTC, make sure you select trade view when using Binance.

• On the chart of the pair click on indicators icon

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• Search for Vortex Indicator

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• Click on it and it will be automatically opened to the chart

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• To check the parameters we have to go through it configuration

• Click on the setting button of the indicator to open the configuration menu

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• On the format menu click on input you will see the default period which 14 and is the most recommended parameters used in Vortex Indicator

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Explain in your own words the concept of vortex indicator divergence with examples.

As I mentioned in the above part this indicator has two lines which are green and red and the green represent an upward movement and the red represent the downward movement , in analysing the indicator upward movement is refer to us ( +VI ) and downward movement is (-VI).

So talking about divergence is when either of the two lines crosses each other, when the green line (+VI) crosses the red line (-VI) it indicate an upward momentum and if the (-VI) crosses the (+VI) it shows signal of a Downward momentum and after crossing each other if the line that cross continue to move in the same direction it indicate a trend in that direction.

Let look at the picture below:

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From the image above we realise a divergence at certain point , where i used a white circle , and after the divergence the trend also changed to the same direction.

Use the signals of VI to buy and sell any two cryptocurrencies

Use the signals of VI to buy and sell any two cryptocurrencies

BUYING STEEM/BTC USING VI

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• From the chart above we can clearly see a crossing of the green line upward indicating that the price will be moving in a bullish direction, so I will use other indicator to confirm the signal.

• Supertrend indicator also gives me all signal to buy the crypto so I will go ahead to buy.

• So in the chart above we have Steem/BTC is showing a buy signal, and Supertrend Indicator is also showing buy so I will buy Steem.

• Go to the order menu and place a limit menu or buy limit at when you want to buy the coin, in this video I will buy with the market price.

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• Finally the order is placed.

SELLING ETH/USDT USING VI

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• From the above chart we can clearly see from the VI that there is a red line crossing the green line indicating that there is a bearish trend about to start therefore it is time to quite the market.

• And confirming from the supertrend indicator which also tells me to sell my stand.

• Going to the sell order book to place a sell trade base on the market price.

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CONCLUSION

In conclusion I will say Vortex Indicator is one of a kind that has less testing but works very well when it comes to market trends, based on the research I made this indicator has gain much popularity after it launching 10 years ago.
And I will like to say this is good for every trader even for beginners, and we all know when it comes to traders we don’t depend on one indicators so one should blend it with others to verify signals.

THANK YOU