RVI Technical Analysis & Relative Vigor Index Signals
Developed 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 and 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 and 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 and sell signals generated using the cross over technique
