Hi again All, I am not sure wether its the right plcae for a request of a new indicator. I tried request new indicator thread but it has been closed by Scorpion. So if anyone knows about this indicator for RVI below, could you pls let us know. Scorpion I am sorry if this request is in the wrong place, please move it if it is. At the same time perhaps you would like to take a look and see if this is anything useful. As usual thanks and really appreciate your time n efforts.
Best Regards
tasse
Calculation of the RVI
To normalize the index to the daily trading range, divide the change of price by the maximum range of price for the day. Thus, the basic equation for the RVI is:
RVI = (Close-Open) / (High-Low)
Where:
OPEN — is the opening price;
HIGH — is the maximum price;
LOW — is the minimum price;
CLOSE — is the closing price.
How the RVI is created.
The main point of Relative Vigor Index Technical Indicator (
RVI) is that in a bull market the closing price is, as a rule, higher, than the opening price. It is the other way around on the bear market. So the idea behind the Relative Vigor Index is that the vigor, or energy, of the move is thus established by where the price ends up at the close.
To normalize the index to the daily trading range, divide the change of price by the maximum range in price for the day. To make a more smooth calculation, one uses a simple moving average. 10 is the best period.
To avoid probable ambiguity one needs to construct a signal line, which is a 4-period symmetrically weighted moving average of the Relative Vigor Index values.
The concurrence of lines serves as a signal to buy or to sell.
Below is a 1hr chart of the EUR/USD with the default setting of the
RVI shown. A red line is drawn which is the signal line. This is a 10 period simple moving average.
A blue
RVI line is drawn, which is a 4-period symmetrically weighted moving average of
RVI values taken from the calculation.
Market Psychology
Each price reflects the consensus of value among the mass of market participants at the moment of the trade. A moving average represents an average consensus of values in a selected period – here a 10 period simple moving average is used for the signal line (Red).
The
fast RVI line (Blue) represents the vigor, or energy of the move, which is established by where the prices end up at the close and reflects mass consensus over a short period. The slower signal line (red) reflects mass consensus over a longer period.
When the
fast RVI line (Blue) rises above the slow signal line (Red), it shows, that bulls dominate the market, and it is better to trade from the long side. When the
fast RVI line (Blue) falls below the slow line (Red), it shows, that bears dominate the market and it pays to trade from the short side.
Trading Rules
Crossovers between the RVI and signal lines identify changing market tides. Trading in the direction of a crossover means going with the flow of the market.
- When the fast RVI line (Blue) crosses above the slow signal line (Red), it gives a buy signal. Consider going long, and place a protective stop below the latest minor low.
- When the fast RVI line (Blue) crosses below the signal line (Red), it gives a sell signal. Consider going short, and place a protective stop above the latest minor high.
More on the RVI
This indicator does not show over sold or bought zones. So, you have to keep these levels in consideration using another indicator.