Relative Vigor Index (RVI)
RVI is based on the idea that in a bull market the closing price is, in general, higher than the opening price. It assumes that the vigor of the move depends on where a candle closed relative to a trend and an opening price. In order to make a smoother calculation, the indicator will often use a simple moving average (green line). Red line is the signal one.
RVI is useful for trading but may give false signals, so it has to be used in combination with other indicators and trading tools.
How to interpret:
- Convergence/divergence. If new price high is higher than the previous one, while the new RVI high is lower than the previous one (divergence), look for the RVI to cross the signal line to the upside and then buy. If a new price low is below the previous one, while the new RVI low is higher than the previous one (bearish convergence), look for the RVI to cross the signal line upside down and then sell.
- Overbought/oversold conditions. If the market is flat, look for the RVI to exit the overbought (high) or oversold (low) areas for a signal to sell/buy. Note that the indicator doesn’t have an overbought or oversold area, so traders need to figure this out themselves.
Other articles in this section
- Williams’ Percent Range (%R)
- Bulls/Bears Power
- Average True Range
- Monetary policy: impact on exchange rates
- Standard deviation
- Parabolic SAR
- Bollinger bands
- Moving averages
- Trend indicators
- Introduction to technical indicators
- Support and resistance
- Technical analysis
- Central Banks: policy and effects
- Fundamental factors
- Fundamental analysis
- Fundamental vs technical analysis