Relative Vigor Index (RVI)
Quick Definition
A technical oscillator that measures the conviction of a recent price move by comparing closing prices relative to the trading range.
Key Takeaways
- RVI compares closing prices relative to opening prices and the trading range to measure trend conviction
- Signal line crossovers generate buy and sell signals similar to MACD
- Works best in trending markets as a confirmation tool
- The indicator is based on the principle that closings are stronger in uptrends and weaker in downtrends
What Is Relative Vigor Index (RVI)?
The Relative Vigor Index (RVI) is a momentum oscillator based on the principle that prices tend to close higher than they open during uptrends and lower than they open during downtrends. The indicator measures the "vigor" or energy behind price movements by comparing the close-open relationship to the high-low range, then smoothing the result with a moving average. The formula involves calculating the ratio of the close-to-open difference divided by the high-to-low range, with additional smoothing using a 4-period symmetrically weighted moving average. RVI generates signals through centerline crossovers (above/below zero) and signal line crossovers (RVI crossing its signal line). The indicator works best in trending markets where the closing price consistently relates to the direction of the trend. It is often used as a confirmation tool alongside other indicators rather than a standalone signal generator.
Relative Vigor Index (RVI) Example
- 1When RVI crosses above its signal line while both are below zero, it suggests bearish momentum is weakening and a potential reversal is forming.
- 2A rising RVI above zero during an uptrend confirms that closes are consistently strong relative to the trading range.
Related Terms
Relative Strength Index (RSI)
A momentum indicator measuring the speed and magnitude of price changes on a 0-100 scale, used to identify overbought or oversold conditions.
Stochastic Oscillator
A momentum indicator comparing a security's closing price to its price range over a specified period, identifying overbought and oversold conditions.
Moving Average Convergence Divergence (MACD)
A trend-following momentum indicator showing the relationship between two moving averages of a security's price.
Rate of Change (ROC)
A momentum oscillator that measures the percentage change in price between the current price and the price a certain number of periods ago.
Moving Average
A calculation that averages a security's price over a specific number of periods, smoothing price data to identify trends.
Bollinger Bands
A volatility indicator consisting of a middle moving average and two bands that expand and contract based on price volatility.
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