The RVI indicator is a technical indicator whose abbreviation stands for Relative Vigor Index. The idea underlying the work of the RVI indicator is the pattern that, in a bull market, the closing price is usually higher than the opening price. In a bear market, on the contrary, the closing price is lower than the opening price.
Calculation of indicator values
The value of "Vigor" in the RVI indicator is calculated based on the difference between the values of the opening level and closing level. The indicator is calculated as a value equal to the actual price change for a period, normalized to the maximum price range of this period, for example, minute, day, or hour. For additional smoothing of the calculations, a moving average with a default period of 10 is used, as well as a signal line (4-period symmetric weighted smoothed average taken from the value of the Relative Strenght Index indicator).
The indicator has two lines. The first line is constructed as RVI, but instead of the Close and Open price difference and the High and Low difference, the sums of 4-period symmetrically weighted moving averages are used. The second line is a 4-period symmetrically weighted moving average from the first.
In the indicator settings, there is an ExtRVIPeriod parameter by default equal to 10. An increase in this parameter smooths the calculation period, making the indicator less susceptible. We recommend using higher values to avoid erroneous signals.
RVI is simple and easy to use. Two lines are visualized in the indicator window: red and green. The intersection of these two lines indicates a possible trend reversal. In addition, the achievement of these lines maximum or minimum values also indicates a possible change of direction.
RVI is one of the few technical indicators that can be ahead of the curve, that is, signal a trend change even before this change becomes obvious. We recommend using this useful tool when building your trading strategy in combination with other elements. You can also find ready-made systems using the RVI indicator on our website in the Strategies section.
Download the Relative Vigor Index (RVI) for MT4 from the button below
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