The Relative Vigor Index (RVI) is a momentum indicator used in technical analysis that measures the strength of a trend by comparing a security’s closing price to its trading range while smoothing the results using a simple moving average (SMA). The RVI’s usefulness is based on the observed tendency for prices to close higher than they open during…
The RVI works best in trending markets and tends to generate 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.
The RVI indicator is calculated in a similar fashion to the stochastics oscillator but it compares the close relative to the open rather than comparing the close relative to the low. Traders expect the RVI value to rise as the bullish trend gains momentum because, in this positive setting, a security’s closing price tends to be at the top…
A trader might examine potential changes in a trend with the RVI indicator by looking for divergences with the current price and then identifying specific entry and exit points with traditional trendlines and chart patterns. The two most popular trading signals include:
