RVI Technical Analysis & Relative Vigor Index Signals
Created by John Ehler
The RVI combines the older concepts of technical analysis with modernized digital trading signal processing theories & filters to create a practical & useful technical indicator.
The basic principle behind it is simple -
- Prices tend to close higher than where they open in up-trending markets and
- Prices close lower than where they open in down-trending markets.
The force (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 then is averaged to the mean average daily range & then plotted.
This makes the index a responsive oscillator technical indicator 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 technical indicator. The basic technique of interpreting the index is to use the cross-overs of the RVI and the SignalLine. The Signals are derived & generated when there is a cross over of the 2 lines.
Bullish Signals - a buy signal happens when the RVI crosses above the Signal-Line.
Bearish Signals - a sell trade signal happens when the RVI crosses below the Signal-Line.
Buy & sell trading signals derived/generated using the crossover trading strategy
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