Vortex Indicator for Nifty and Bank Nifty: +VI and -VI Explained

What the Vortex Indicator Actually Measures

The Vortex Indicator was published by Etienne Botes and Douglas Siepman in the January 2010 issue of Technical Analysis of Stocks and Commodities. It belongs to the same family as Welles Wilder's Directional Movement system, and it shares Wilder's True Range building block. The idea is simple. When price trends up, today's high tends to sit well above yesterday's low, and when price trends down, today's low tends to sit well below yesterday's high. The indicator turns those two relationships into two lines that you can read at a glance.

The two lines are the positive vortex line, written as +VI, and the negative vortex line, written as -VI. Both float around the 1.0 level. When +VI is above 1 and rising while -VI is below 1 and falling, buyers are in control. When the picture flips, sellers are in control. Because the lines are normalised by True Range, you can compare a Nifty reading with a Reliance reading even though their rupee ranges are completely different.

This matters for Indian traders because indices like Nifty 50 and Bank Nifty move in clear directional legs around results season, RBI policy days and monthly expiry, then chop sideways for days in between. The Vortex Indicator is built to flag the start of those directional legs, which is exactly when a trend trader wants to be paying attention.

The Formula, Step by Step

There are four pieces. First, the True Range, TR, for the current bar is the largest of three distances: current high minus current low, the absolute value of current high minus the previous close, and the absolute value of current low minus the previous close. Using absolute values keeps every distance positive, which is the part many guides get wrong.

Second, the positive Vortex Movement, VM+, is the absolute value of current high minus the previous low. Third, the negative Vortex Movement, VM-, is the absolute value of current low minus the previous high. Both VM+ and VM- are absolute values, so neither can ever be a negative number. If your VM- comes out negative, you have made an arithmetic error. Fourth, choose a lookback period, usually 14 bars, sum each of the three series over that window, then divide.

• TR (current) equals the largest of: High minus Low, the absolute value of High minus previous Close, and the absolute value of Low minus previous Close.
• VM+ equals the absolute value of (current High minus previous Low). Always positive.
• VM- equals the absolute value of (current Low minus previous High). Always positive.
• +VI equals (sum of VM+ over n bars) divided by (sum of TR over n bars).
• -VI equals (sum of VM- over n bars) divided by (sum of TR over n bars).

A Fully Worked Example on Nifty 50

Let us compute real +VI and -VI values on a sequence of Nifty 50 daily bars. The price levels are illustrative but realistic for an index trading near 25,000, and the arithmetic is exact so you can reproduce it. We need a prior bar to seed the previous high, low and close, then five trading bars. The prior bar, call it Day 0, had a High of 24,850 and a Low of 24,710. From there we work forward.

Now sum each column over the five bars. Sum of TR equals 230 plus 190 plus 190 plus 290 plus 230, which is 1,130. Sum of VM+ equals 280 plus 320 plus 150 plus 340 plus 420, which is 1,510. Sum of VM- equals 50 plus 60 plus 220 plus 90 plus 60, which is 480. Note that the True Range for each bar used the previous close where needed, and every single VM+ and VM- value is positive, exactly as the formula requires.

Divide to get the lines. +VI equals 1,510 divided by 1,130, which is 1.336. -VI equals 480 divided by 1,130, which is 0.425. Because +VI at 1.336 sits far above -VI at 0.425, the indicator is reading a healthy uptrend over this window. A practical trigger would have been Day 1 or Day 2 where +VI pushed above -VI, with the widening gap on Day 4 and Day 5 confirming strength. In live trading you would normally run the full 14 bar window. This 5 bar version is shortened only so the arithmetic stays readable, and it is marked illustrative, not a forecast.

Turning the Reading Into a Bank Nifty F&O Trade

Say the same +VI above -VI crossover appears on Bank Nifty near 52,000 and you want to express it through a futures position. The Bank Nifty futures lot size is 30. If you buy one lot at 52,000 and the move runs to 52,400, that is a 400 point gain. Profit equals 400 multiplied by 15, which is 6,000 rupees, illustrative and before costs. If the trade goes against you and you exit at 51,800, the loss is 200 points multiplied by 15, which is 3,000 rupees. The Vortex crossover gave the direction. Your stop, placed for example just below the Day 3 style pause low, defined the risk.

Costs matter on index futures. STT on the sell side of futures is 0.02 percent of the turnover, plus exchange transaction charges, SEBI fees, GST on those fees, stamp duty on the buy side and brokerage. On a 52,000 single lot futures round trip these typically add up to roughly a few hundred rupees with a discount broker. F&O gains on Bank Nifty are treated as business income and taxed at your income tax slab, not under the 20 percent short term capital gains rate that applies to equity delivery. That distinction changes how you plan year end taxes, so keep a clean trade log.

Reading the Lines for Entries and Exits

The core signal is the crossover. When +VI crosses above -VI, momentum has turned up and trend traders look to go long or cover shorts. When -VI crosses above +VI, momentum has turned down. The wider the gap between the two lines, the stronger the trend, so a +VI of 1.30 against a -VI of 0.45, as in our worked example, is a far more convincing trend than two lines hugging near 1.0.

Many traders treat the 1.0 level as a reference. A +VI that holds above 1.0 while -VI stays below 1.0 keeps you in a long. The cross of +VI back below 1.0, or a -VI cross above +VI, is a common exit cue. Because the lines are normalised, the same logic reads identically on Nifty, on Reliance and on a smaller cash stock, which makes the Vortex easy to scan across a watchlist.

Best Settings for NSE and BSE Instruments

The default period is 14 bars and it is a sensible starting point for Indian instruments. On a daily Nifty 50 chart, 14 captures roughly three trading weeks, long enough to filter the choppy mid expiry days but short enough to catch a fresh move into the next monthly expiry. For positional swing trades on liquid cash stocks like TCS, HDFC Bank or Infosys, many traders stretch the period to 21 or 28 to cut down on noise.

• Intraday Nifty and Bank Nifty on 5 or 15 minute charts: period 9 to 14, expect more signals and more whipsaws.
• Daily index and large cap swing trades: period 14 as standard.
• Positional and portfolio level decisions: period 21 to 28 for stability.
• Always backtest the chosen period on the specific instrument before committing real capital.

Combining the Vortex With Other Tools

The Vortex tells you direction and strength but says nothing about overextension. Pairing it with the Relative Strength Index helps. A +VI above -VI crossover with RSI rising through 50 is a cleaner long than a crossover when RSI is already above 70 and stalling. A 20 or 50 period moving average adds a trend filter, so you only take +VI buy signals while price is above the average.

Volume confirmation is especially useful on individual NSE stocks. A Vortex buy signal on Reliance backed by above average delivery volume is more trustworthy than the same signal on thin volume. For index F&O, watch open interest and the option chain around the signal, since a directional Vortex read alongside aggressive call writing unwinding can be a strong combination into expiry.

• Vortex for direction and trend strength.
• RSI or Stochastic for momentum and overbought or oversold context.
• Moving average as a trend filter to avoid counter trend signals.
• Volume or open interest to confirm conviction behind the move.

Limitations and Where It Fails

The Vortex is a trend tool, and like every trend tool it struggles in range bound markets. During a quiet Nifty week with a tight 150 point range, +VI and -VI will cross back and forth near 1.0 and most of those crossovers are noise. Taking every signal in such conditions bleeds capital through costs and small stop outs. The fix is to only trade Vortex signals when a higher timeframe or a moving average filter says a trend exists.

The indicator is also lagging by design. Because it sums over a window, it confirms a trend after it has begun rather than predicting it. On gap heavy days, common in Indian stocks after results or news, the True Range and Vortex Movements can spike and produce a sharp but unreliable reading. Treat the first signal after a large gap with caution and wait for a second bar of confirmation.

Risk Management and Position Sizing

A signal is only half the trade. Decide your rupee risk per trade first, often 1 to 2 percent of capital, then work backwards to position size. If you risk 1 percent of a 5 lakh account, that is 5,000 rupees. On the Bank Nifty example with a 200 point stop and lot size 30, one lot risks 3,000 rupees, which fits inside that budget. Sizing in whole lots is mandatory in F&O, so you cannot buy a fraction of a lot to fine tune risk.

Place stops at structure, not at arbitrary points. A long taken on a +VI crossover is naturally invalidated if price breaks below the swing low that preceded the signal, which is also roughly where -VI would cross back above +VI. Define your exit before you enter, log every trade, and remember that F&O losses can be set off and carried forward under business income rules, which is another reason to keep records that match your broker contract notes.

• Fix rupee risk per trade before sizing, commonly 1 to 2 percent of capital.
• Size in whole F&O lots only, Nifty 75, Bank Nifty 15, FinNifty 25, Sensex 10.
• Place stops at structure, near where the opposite Vortex line would cross.
• Log every trade so business income tax filing and set off claims are clean.

Sources and Further Reading

For authoritative data and further reading, refer to Zerodha Varsity, Investopedia, NSE Indices and SEBI. Always confirm current rules, rates, lot sizes and contract specifications on the official source before you trade. All numbers in this guide are illustrative and are not a promise of returns.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia, NSE Indices (Nifty Indices) and SEBI (Securities and Exchange Board of India). Always confirm current rules, rates and contract specifications on the official source before you trade.