Technical Indicators: The Concept of Vortex Indicator Divergence

The concept of vortex indicator divergence with examples

In technical analysis, divergence is a term that is used to represent when the price of any cryptocurrency on the chart is moving in the opposite direction of the technical indicator on the chart. Vortex indicator divergence in this case is basically when the price of the selected cryptocurrency pair in moving in one direction and the positive vortex line or the vortex indicator is moving in another direction.

The vortex indicator divergence can either be bullish divergence or bearish divergence. Simply put, when the price is moving down and the positive vortex (+VI) line is moving up, then it is a bullish divergence, and when the price is moving up and the positive vortex (+VI) line is moving down, then it is a bearish divergence. To demonstrate the vortex indicator divergence, I will be using the ETH/USDT chart.

Bullish divergence

ETH/USDT Chart

Bearish divergence

ETH/USDT Chart

Using the signals of Vortex Indicator in real world example

LINK/USDT
Using the vortex indicator to identify a buy signal, when the positive vortex (+VI) crosses higher than the negative vortex (-VI), it can be a very good buy signal. On the LINK/USDT 3 min chart, the positive vortex (+VI) crossed higher than the negative vortex (-VI) which was a good sign to buy because I am anticipating the market to move upwards and hit my take profit sell zone. I entered the market at 23.484 USDT and using the 1:1 risk-reward, I set my take profit at 23.672 USDT and my stoploss at 23.292 USDT. While the profit margin isn’t much, it is still a good profit for scalp trading.

LINK/USDT Chart

BNB/USDT
For the sell signal, I also used the vortex indicator to identify the sell signal, when the positive vortex (+VI) crosses lower than the negative vortex (-VI), it can be a very good sell signal. On the BNB/USDT 5 min chart, the positive vortex (+VI) crossed lower than the negative vortex (-VI) which was a sell signal for me to put a sell order. I am anticipating the positive vortex (+VI) line to spread apart from the negative (-VI) line, so I placed a sell order and waiting for the market to move downwards and hit my take profit zone. I entered the market at 33.32 USDT and using the 1:1 risk-reward, I set my take profit at 332.12 USDT and my stoploss at 334.52 USDT.

BNB/USDT Chart

Technical Indicators like the vortex indicator can be very valuable for traders to identify good entry and exit point. We all know that analysis is one of the key aspects of trading, whether it is day trading or scalp trading, technical analysis is very important to help make the best trading decisions. The vortex indicator is one of the many technical indicator available for traders to use for technical analysis. It is a very powerful indicator that can not only identifies when a trend reversing or when a trend is losing momentum or when a trend is coming to an end, it also gives accurate signals. Traders make use of it for buy and sell signals. However, it is important to not put all the trust on the vortex indicator and even though it gives accurate signals, it also gives a lot of false signals as well. For this reason, it is important to also combine it with another indicator like MACD or moving average for signal confirmation before making any trading decision.