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Relative Vigor Index (RVI)

Relative Vigor Index (RVI)
TradingTechnical AnalysisTechnical Analysis Basic Education

What Is the Relative Vigor Index?

The Relative Vigor Index (RVI) is a momentum indicator utilized in technical analysis that measures the strength of a trend by contrasting a security's closing price with its trading range while smoothing the outcomes utilizing a simple moving average (SMA).

The RVI's convenience depends on the noticed propensity at costs to close higher than they open during uptrends, and to close lower than they open in downtrends.

The Formula for the Relative Vigor Index (RVI)

The RVI formula might look convoluted, however it is actually genuinely natural:
NUMERATOR=a+(2×b)+(2×c)+d6DENOMINATOR=e+(2×f)+(2×g)+h6RVI=SMA of NUMERATOR for N periodsSMA of DENOMINATOR for N periods Signal Line =RVI+(2×i)+(2×j)+k6where:a=Close−Openb=Close−Open One Bar Prior to ac=Close−Open One Bar Prior to bd=Close−Open One Bar Prior to ce=High−Low of Bar af=High−Low of Bar bg=High−Low of Bar ch=High−Low of Bar di=RVI Value One Bar Priorj=RVI Value One Bar Prior to ik=RVI Value One Bar Prior to jN=Minutes/Hours/Days/Weeks/Months\begin &\text=\frac{a+(2\times b)+(2\times c)+d}{6}\[7pt] &\text=\frac{e+(2\times f)+(2\times g)+h}{6}\[7pt] &\text=\frac{\text{SMA of NUMERATOR for $N$ periods}}{\text{SMA of DENOMINATOR for $N$ periods}}\[7pt] &\qquad\text{\ Signal Line }=\frac{\text+(2\times i)+(2\times j)+k}{6}\[7pt] &\textbf\ &a = \text-\text\ &b=\text-\texta\ &c =\text-\textb\ &d =\text-\textc\ &e =\text-\texta\ &f =\text-\textb\ &g =\text-\textc\ &h =\text-\textd\ &i = \text\ &j = \texti\ &k = \textj\ &N = \text{Minutes/Hours/Days/Weeks/Months} \end

Instructions to Calculate the Relative Vigor Index (RVI)

  1. Pick a N period to inspect.
  2. Distinguish the open, high, low, and close values for the current bar.
  3. Distinguish the open, high, low, and close values for lookback periods prior to the current bar.
  4. Ascertain SMAs for NUMERATOR and DENOMINATOR over the N period.
  5. Partition NUMERATOR value from DENOMINATOR value.
  6. Place the outcome in the signal line equation and plot it on a graph.

What Does the Relative Vigor Index (RVI) Tell You?

The RVI indicator is calculated likewise to the stochastics oscillator yet it compares the close relative to the open as opposed to contrasting the close relative with the low. Traders anticipate that the RVI value should rise as the bullish trend gains momentum in light of the fact that, in this positive setting, a security's closing price will in general be at the highest point of the reach while the open is close to the low of the reach.

The RVI is deciphered similarly as numerous different oscillators, for example, moving average intermingling divergence (MACD) or the relative strength index (RSI). While oscillators will generally change between set levels, they might stay at extreme levels over a drawn out period of time so interpretation must be embraced in a broad setting to be actionable.

The RVI is rather a centered oscillator and not a united (trend-following) oscillator, and that means that it's regularly shown above or below the price chart, moving around a center line instead of the genuine price. It's smart to involve the RVI indicator related to different forms of technical analysis to track down the highest likelihood results.

Illustration of How To Use the Relative Vigor Index (RVI)

A trader could inspect possible changes in a trend with the RVI indicator by searching for divergences with the current price and afterward recognizing specific entry and exit points with traditional trendlines and chart designs.

The two most well known trading signals include:

  • RVI Divergences: Divergence between the RVI indicator and price recommends there will be a close term change in the trend toward the RVI's trend. Thus, in the event that a stock price is rising and the RVI indicator is falling, it predicts the stock will reverse over a shorter period of time.
  • RVI Crossovers: Like numerous oscillators, the RVI has a signal line that is frequently calculated with price inputs. A crossover over the signal line is a bullish indicator, while a crossover below the signal line is a bearish indicator. These crossovers are intended to be leading indicators of future price heading.

Limitations of Using the Relative Vigor Index (RVI)

The RVI works best in trending markets and will in general create false signals in rangebound markets. Results can be improved by setting longer-term lookback periods, which help to reduce the impact of whipsaws and short-term countertrends.

Highlights

  • The RVI wavers across a pre-determined center line as opposed to a joined trend.
  • The Relative Vigor Index (RVI) is a technical momentum indicator.
  • Divergences between the RVI indicator and price recommend there will be a close term change in the trend.