Unlike other indicators we have tested 100 times on this channel, Vortex is a fairly
new indicator.
Is this new indicator even profitable in trading?
Lets find out.
In this video, we are going to test the vortex indicator 100 times, to find its real win
rate.
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We test many different trading strategies 100 times, to find their real win rates.
After all, you don't want to risk your money on a strategy, that doesn't even work.
Now, the Vortex indicator has gained a lot of attention in the recent years.
Many traders say, that vortex is one of the most reliable indicator, that gives accurate
entry signals.
Furthermore, it is a trend following system, that is used to find the end of the pullbacks,
and end of a trend.
It was made in 2010, so it is fairly recent compared to other popular indicators.
On Trading View, this is how the Vortex indicator looks like.
It will come with two vortex lines, a positive vortex line that will show the uptrend, and
a negative vortex line that will indicate a down trend.
Here, the blue line is the positive vortex line, and the red line is the negative vortex
line.
The Vortex Trading Strategy is simple, and it is very similar to the Aroon trading strategy.
When the positive Vortex line, crosses above the negative vortex line, it's an uptrend
signal.
Similarly, when the negative vortex line, crosses above the positive vortex line, it's
a down trend signal.
Now remember, the direction of the trend is found, by looking at the vortex line that
is at the top.
When the down trend signal is generated, the negative vortex line is actually at the top,
instead at the bottom.
Many traders suggest, to buy when the vortex gives an up trend signal, and sell when a
down trend signal is given by the vortex lines.
Now since this is a trend following indicator, we will use a moving average to find the direction
of the trend.
This will help us avoid some false signals given by the vortex indicator.
In this case, we will use the 200 period moving average to find the direction of the long
term trend.
If price is below the moving average, we should only take sell signals, as there is a down
trend going on.
Similarly, if price is above the moving average, we should only take buy signals, as there
is an uptrend going on.
So, the complete vortex strategy goes something like this.
When the vortex gives a positive crossover, and the price is above the 200 period moving
average, it is a buy signal.
Usually, I set the stoploss below the swing low.
But for this indicator, I found that it is better to use the Parabolic sar, or the ATR
indicator to set the stoploss, instead of setting it below the swing low.
So, in the long setup, set the stoploss below the parabolic sar.
Similarly, when the price is below the 200 period moving average, and the vortex gives
a negative crossover, it is a sell signal.
As for the stoploss, set it above the parabolic sar.
So, I tested Vortex indicator 100 times, here's what happened.
Number 1.
I tested other indicators on the same Forex Pair, and on the same time frame.
While testing the Vortex indicator 100 times, I noticed that the vortex indicator was giving
a lot of entry signals compared to other indicators we have tested recently.
And on top of that, the signals that the vortex was giving, were actually right.
You can see how the profit graph in the Trading Rush app, is going almost straight up.
If you want, you can download the Official Trading Rush app from the Play Store, or using
the link in the description.
Use it to test your Trading Strategy.
It will calculate win rate and other useful data, in just one click.
Number 2.
Vortex is designed to identify the end of a pullback in a trend.
And During the backtest, I found that the Vortex was able to spot the ends of the pullbacks,
and the end of the trends with a good accuracy.
But as I took more trades, the disadvantages of the vortex indicator started to appear.
Number 3.
The biggest disadvantage I found about the Vortex indicator, is that it gives a lot of
signals in a short amount of time.
When the price is trending strongly, these signals work fine.
But when the trend was weak, the vortex was giving a lot of false signals.
Now, this can be easily fixed by using a fast moving average.
a 21 period, or a 50 period moving average will filter the weak trends.
But you should be very careful while using the Vortex indicator, especially if you are
a beginner trader.
Since market moves sideways most of the time, you can end up taking multiple losing trades
in a row.
In fact, out of other strategies we have tested on this channel, the vortex strategy had the
highest amount of losses in a row.
So, if you are using the Vortex Indicator, it's a good idea to use it with other indicators,
or with support and resistance levels.
It's probably not a good idea to trade using the Vortex indicator alone.
Furthermore, you can even use the alligator indicator to find strength of the trend, and
to see if the price is ranging or not.
I have already made a detailed video about the Alligator indicator, check it out if you
want.
So, after testing the Vortex Trading Strategy 100 times, the win rate I got was approximately
46 percent.
Which is still a profitable win rate, since I tested this strategy with a reward to risk
ratio of 1.5 to 1.
But compared to other indicators we have tested so far, it's not that good on its own.
The indicator is fairly new, and has great potential for improvement.
If you can identify the strong trend, you will find this indicator very useful.
But like I said, this indicator had the highest number of losses in a row in this series.
I lost 12 trades in a row, and won 6 trades in a row.
In the app, I had the starting balance of 10000.
At one point, the account was up by 2700, but after some losses in a row, the final
profit was 1500, which is not a bad profit at all.
Profit is still a profit, and in this backtest, we were only risking 1 percent of the account
balance per trade.
The most you should risk as a new trader is 2 percent.
If we had risked 2 percent per trade, we would have made more profit than this.
But if you risk more than 2 percent per trade, it will be very difficult to handle losing
trades that will come in a row, especially as a new trader, and especially with a trading
strategy that easily gives around 10 losing trades in a row.
But, the vortex trading strategy was still able to make money in the end, because of
a decent risk to reward ratio.
That's all.
Now you know a bit more about the vortex indicator.
Like the video if you liked it.
If you want to see other trading strategies tested 100 times, subscribe to the channel.
And don't forget to check out other Trading videos on the Trading Rush Channel, to find
their real win rates.
Thanks a lot for watching.