All aboutRVI Indicator– Some Vital Points
RVI was developed by Donald Dorsey and it is an abstract of Relative Volatility Index. The idea behind RVI is that the closing price is higher than the opening price in up markets and the closing price is lower than the opening price in the down markets. RVI can be calculated by dividing the change in price by the range of price.
RVI (n) = (Close (n) €" Open (n))/ (High (n) €" Low (n))
Where, n is the no. of time period.
RVI (n) is the Relative Volatility Index at n time period
Close (n) indicates the closing price at the ending of the (n) time period and open (n) indicates the opening price at the beginning of the (n) time period.
High (n) is the maximum range of price between the (n) time periods. Low (n) is the minimum range of price between the (n) time periods.
Calculation of RVI indicator is just like stochastic oscillator but RVI correlates the close relative to the open instead of to the low. The traders always want the value of RVI to grow when the bullish style gains power. This is because in this atmosphere closing price of the security tends to be at the higher range where as the opening price is close to the lower level of the day. In order to make calculation smoother, choose the best period which is 10.
0 -100 is the range of RVI. RVI measures the strength of the market. The rules developed for RVI buying and selling signals are as follows:
1. If RVI > 50 then buy it
2. If RVI < 50 then sell it
3. If you miss the initial buying signal then try to buy when RVI > 60
4. If you miss the initial selling signal then try to sell when RVI < 40
5. If the RVI signal falls below 40, it is required to close a long position
6. If the RVI signal rises above 60, it is required to close a short position
RVI Divergence Indicator
The generation III RVI divergence is a latest indicator with complicated mathematic algorithm. The bullish divergence takes place when the Relative Vigor Index fails to make a new low although the price does. In Bearish divergence, the case is different. The bearish divergence takes place when the Relative Vigor Index fails to hit a new high although the price does.
Finally, RVI is a very useful indicator that is why it is widely used.
RVI (n) = (Close (n) €" Open (n))/ (High (n) €" Low (n))
Where, n is the no. of time period.
RVI (n) is the Relative Volatility Index at n time period
Close (n) indicates the closing price at the ending of the (n) time period and open (n) indicates the opening price at the beginning of the (n) time period.
High (n) is the maximum range of price between the (n) time periods. Low (n) is the minimum range of price between the (n) time periods.
Calculation of RVI indicator is just like stochastic oscillator but RVI correlates the close relative to the open instead of to the low. The traders always want the value of RVI to grow when the bullish style gains power. This is because in this atmosphere closing price of the security tends to be at the higher range where as the opening price is close to the lower level of the day. In order to make calculation smoother, choose the best period which is 10.
0 -100 is the range of RVI. RVI measures the strength of the market. The rules developed for RVI buying and selling signals are as follows:
1. If RVI > 50 then buy it
2. If RVI < 50 then sell it
3. If you miss the initial buying signal then try to buy when RVI > 60
4. If you miss the initial selling signal then try to sell when RVI < 40
5. If the RVI signal falls below 40, it is required to close a long position
6. If the RVI signal rises above 60, it is required to close a short position
RVI Divergence Indicator
The generation III RVI divergence is a latest indicator with complicated mathematic algorithm. The bullish divergence takes place when the Relative Vigor Index fails to make a new low although the price does. In Bearish divergence, the case is different. The bearish divergence takes place when the Relative Vigor Index fails to hit a new high although the price does.
Finally, RVI is a very useful indicator that is why it is widely used.
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