So the idea behind Relative Vigor Index is that the vigor, or energy, of the move vantage fx is thus established by where the prices end up at the close. To normalize the index to the daily trading range, divide the change of price by the maximum range of prices for the day. To make a more smooth calculation, one uses Simple Moving Average.

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Sell at that level and place your stop loss anywhere above your Fibo level. You can also place it above the next level above your Fib level. You can also take your profit when the price reaches the 0 level of the Fibonacci level. In the following examples, we show two effective trading methods – using the RVI with the RSI and the RVI with the Fibonacci retracement levels. Conversely, a cross of the red line above the green line in a downward direction is a call to short the trade. The appearance of the cross below the zero line reinforces this.

Simple Price Oscillator Trading Strategies

The Relative Vigor Index (RVI) is a momentum indicator used in technical analysis. It 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). It smooths out price fluctuations using a simple moving average, which makes trends easier to identify for traders. The main point of Relative Vigor Index Technical Indicator (RVI) is that on the bull market the closing price is, as a rule, higher, than the opening price.

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

The Relative Vigor Index (RVI) indicator can also be combined with Fibonacci retracement levels to find a confluence of their trade signals. Here, we observe when the RVI lines cross at the same region of a significant Fibonacci retracement level. On the RSI indicator, wait for it to generate trading signals.

1. The index is not one of the more popular indicators, but that does not mean it lacks accuracy.
2. The process of calculating the relative vigor index is relatively complex compared to other indicators.
3. A buy signal happens when the two lines make a crossover at a lower level when pointing upwards.
4. We will cover five strategies you can test to see which matches your trading style.

You should then calculate the simple moving averages for the numerator and denominator for the period. As you may have noted, this is a process similar to how the stochastics oscillator is calculated. Traders use the indicator to identify when the price of an asset is oversold or overbought. Overbought levels are used to signal opportunities to short or sell while oversold levels are used to signal opportunities to buy.

To place a short-sell trade, follow the same guideline with a reverse of the signals observed. In such a case, the RVI green line must cross below the red line, and the RSI should confirm this bearish signal. Conversely, a bullish divergence is a price action movement towards the south while the RVI indicator line moves up. Enter a buy market after confirming with other tools in this situation. It shows that though the price may increase, the strength of this upward movement is decreasing, and the sellers’ pressure may soon begin to weigh in. When this happens, place a sell order after confirming with other technical analysis tools.

The default period in most platforms is 10 while the default colors are red and green. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

Yet, the RVI should be combined with other indicators like RSI, MACD, and Fibonacci luno exchange review retracement tools to place a trade. The Relative Vigor Index (RVI) indicator is a momentum oscillator that captures the strength of price movements in the market. It seeks to evaluate the likelihood of price action continuing in the direction of an existing trend or making a reversal. The Relative Vigor Index (RVI) is based on the likelihood of prices closing higher than the open in market uptrends, and similarly, closing lower than the open in downtrends.

Therefore, I strongly suggest you combine the relative vigor index with additional trading tools to identify head fakes. The interpretation of the relative vigor index indicator is not very complicated. There is a zero line, the indicator line, and the signal line that should be observed. You may notice that the signals that the indicator generates according to the general rules of interpretation should rather be seen as price-confirming. The indicator can therefore be running behind the course most of the time, otherwise known as lagging.

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On the other hand, if the price is falling, continue shorting the asset as long as the two lines are declining. The first step for calculating the RVI is to identify the period to examine. Still, you can tweak this period to suit your trading strategy. Observe where the cross of the green RVI line below the red signal line coincides with a retracement from any of the Fibonacci levels. Draw your Fibonacci line from the swing low to the swing high on the same chart.

Also, at the same time, the price breaks the 20-period SMA of the Bollinger Bands in a bearish direction, which is our short trigger. Due to the risk of false signals, we will now cover 5-day RVI indicator trading strategies. The red line is the “trigger line” because it provides trade signals when it crosses above or below the green line. The green line is a standard simple moving average of the Relative Vigor Index calculation. Although you can adjust the green line, the default value is 10-periods. The RVI is interpreted in the same way as many other oscillators, such as moving average convergence-divergence (MACD) or the relative strength index (RSI).

Green Lines and Red Lines

A forex trading strategy designed to make maximum profits from a long-term uptrend can be created using the Relative Vigor Index (RVI) in conjunction with other technical indicators. The RVI compares the closing price to price range and provides a reading of the strength of price movement up or down. Higher values for the RVI indicate increasing trend strength, while lower values indicate a lessening of momentum. As a momentum indicator, the slope of the RVI often changes direction ahead of price. RVI Divergences and RVI Crossovers are the two most popular trading signals to use under the RVI indicator and are best used in analyzing data from trending markets.