Relative Vigor Index

Introduction to Relative Vigor Index Technical Indicator (RVI)

The Relative Vigor Index (RVI) is a technical indicator that helps identify the strength and direction of a market trend. It focuses on the relationship between closing and opening prices, with higher closing prices indicating a bullish market and lower closing prices indicating a bearish market.

Calculating the Relative Vigor Index

To calculate the RVI, the change in price is divided by the maximum price range for the day, normalizing the index to the daily trading range. A Simple Moving Average (SMA) is then applied to create a smoother calculation. The recommended period for the SMA is 10.

Signal Line Construction

To avoid ambiguity, a signal line is constructed using a 4-period symmetrically weighted moving average of the RVI values. The signal line helps identify buy or sell signals when it coincides with the RVI line.

RVI (solid) and its signal line (dashed); crossings of the two lines give the signals.

Calculation of Relative Vigor Index

VALUE1 = (CLOSE - OPEN) + 2 * (CLOSE(1) - OPEN(1)) + 2 * (CLOSE(2) - OPEN(2)) + (CLOSE(3) - OPEN(3))
VALUE2 = (HIGH - LOW) + 2 * (HIGH(1) - LOW(1)) + 2 * (HIGH(2) - LOW(2)) + (HIGH(3) - LOW(3))
RVI = SUM(VALUE1, N) / SUM(VALUE2, N)
SIGNAL = (RVI + 2 * RVI(1) + 2 * RVI(2) + RVI(3)) / 6

Where:

CLOSE(1), OPEN(1), HIGH(1) and LOW(1) are the prices of the bar 1 bar back, and so on for 2 and 3;
N is the indicator period (10 by default);
SIGNAL is the signal line, a symmetrically weighted moving average of the RVI.