Vortex Oscillator

Vortex Oscillator (VO)

The Vortex Oscillator is a normalized adaptation of the classic Vortex Indicator, designed to simplify trend identification and provide clearer trading signals. This enhanced version transforms the traditional dual-line Vortex Indicator into a single oscillator that ranges from 0-100, with 50 as the center line.

How It Works

The indicator measures the directional movement of price through two core components:
- Positive movement (VM+): Measures upward price movement
- Negative movement (VM-): Measures downward price movement

These components are normalized relative to the Average True Range (ATR) to create a single oscillator that fluctuates between 0 and 100:
- Values above 50 indicate bullish momentum (VM+ dominates)
- Values below 50 indicate bearish momentum (VM- dominates)
- Crossovers between the oscillator and its signal line identify potential entry and exit points

Key Features

- Normalized Scale: Easy-to-read 0-100 scale instead of the traditional dual-line format
- Adjustable Sensitivity: Choose between Low, Medium, and High sensitivity to match your trading style
- Signal Line: Uses a weighted moving average for signal generation
- Optional Trade Labels: Visual buy/sell signals directly on the chart

How to Use This Indicator

- Trend Direction: Values above 50 suggest bullish conditions, below 50 suggest bearish conditions
- Signal Line Crossovers: When the oscillator crosses above the signal line, consider long positions; when it crosses below, consider short positions
- Divergence: Look for divergence between price and the oscillator for potential trend reversals
- Sensitivity Adjustment: Use higher sensitivity for shorter timeframes or more active trading; lower sensitivity for longer-term positions

Limitations

- Like all momentum oscillators, this indicator may generate false signals during ranging markets
- Performance is best when used in conjunction with other technical analysis tools
- The indicator has slight lag due to its smoothing components

Settings Explanation

- Length: The period used for calculating the Vortex components (default: 9)
- Sensitivity: Adjusts how quickly the oscillator responds to price changes (default: Medium)
- Signal Line Length: The period for the signal line (default: 6)
- Signal Line MA Type: The moving average type for the signal line (default: WMA)
- Show Trading Labels: Option to display buy/sell labels directly on the chart

For optimal results, consider using this oscillator alongside trend identification tools and support/resistance levels.