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.
If you are watching the Trading Rush channel
for the first time, subscribe to the channel.
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.
