Relative Vigor Index
The Relative Vigor Index (RVI) is a technical analysis indicator used to measure the price trend and market momentum of stocks or other financial assets. The core idea behind the RVI is that in an uptrend, the closing price tends to be higher than the opening price, and in a downtrend, the closing price tends to be lower than the opening price. The RVI calculates the average of price changes over a period and compares it to the average of the price range, assessing the market's vigor and trend strength.
Key characteristics include:
Calculation Method: The RVI compares the difference between closing and opening prices, averages these differences, and then ratios them to the average of the price range.
Smoothing: To reduce the impact of short-term fluctuations, the RVI is often smoothed (e.g., with a moving average) to produce more stable trend signals.
Trend Indication: An RVI value above 0 indicates an uptrend, while a value below 0 indicates a downtrend.
Cross Signals: Crossovers between the RVI and its signal line can serve as buy or sell signals.
Example of Relative Vigor Index application:
Suppose a stock has an RVI value of 0.6, and the RVI line crosses above its signal line. This indicates that the stock may be in an uptrend, and a technical analyst might interpret this as a buy signal, considering taking a long position. Conversely, if the RVI value is -0.4 and the RVI line crosses below its signal line, this may be a sell signal, prompting the analyst to consider shorting or selling the stock.
Definition:
The Relative Vigor Index (RVI) is a technical analysis indicator used to measure the price trend and market momentum of a stock or other financial asset. The core idea of the RVI is that in an uptrend, the closing price is usually higher than the opening price; in a downtrend, the closing price is usually lower than the opening price. The RVI evaluates market vigor and trend strength by calculating the average price change over a period and comparing it to the average price range.
Origin:
The Relative Vigor Index was proposed by technical analyst John Ehlers. While studying market momentum and price trends, he discovered the relationship between closing and opening prices and formulated it into the RVI. Since its introduction, the indicator has been widely used in the technical analysis of stocks, futures, and forex markets.
Categories and Characteristics:
1. Calculation Method: The RVI calculates the average difference between the closing and opening prices and compares it to the average price range.
2. Smoothing: To reduce the impact of short-term fluctuations, the RVI is usually smoothed (e.g., using moving averages) to provide more stable trend signals.
3. Trend Indication: When the RVI value is above 0, it indicates an uptrend; when it is below 0, it indicates a downtrend.
4. Cross Signals: Crosses between the RVI and its signal line can serve as buy or sell signals.
Specific Cases:
1. Case 1: Suppose a stock's RVI value is 0.6, and the RVI line crosses above its signal line. This suggests that the stock may be in an uptrend, and technical analysts might consider this a buy signal, contemplating entering a long position.
2. Case 2: Suppose a stock's RVI value is -0.4, and the RVI line crosses below its signal line. This could be a sell signal, and analysts might consider shorting or selling the stock.
Common Questions:
1. How is RVI different from other momentum indicators?
The RVI focuses on the relationship between closing and opening prices, while other momentum indicators like RSI (Relative Strength Index) focus on the magnitude of price changes.
2. How to address the lagging issue of RVI?
Due to the smoothing process, the RVI may have some lag. Investors can combine it with other indicators, such as MACD or RSI, to improve signal accuracy.
