RVI Technical Analysis & Relative Vigor Index Signals
Created by John Ehler
The RVI combines the older concepts of technical analysis with modern digital signal processing theories & filters to create a practical & useful indicator.
The basic principle behind it is simple -
- Prices tend to close higher than they open in up-trending markets and
- Prices close lower than they open in down-trending markets.
The momentum (vigor) of the move will hence established by where the prices end up at the close of the candlestick. The RVI plots 2 lines the RVI Line & the signal Line.
The RVI index is essentially based on measuring of the average difference between the closing & opening price, & this value is then averaged to the mean daily range & then plotted.
This makes the index a responsive oscillator that has quick turning points which are in phase with the market cycles of prices.
Technical Analysis & How to Generate Signals
The RVI is an oscillator. The basic technique of interpreting the index is to use the cross-overs of the RVI and the SignalLine. Signals are generated when there a cross over of the 2 lines.
Bullish Signals - a buy signal occurs when the RVI crosses above the Signal-Line.
Bearish Signals - a sell signal occurs when the RVI crosses below the Signal-Line.
Buy & sell signals generated using the cross over technique
