The Relative Vigor Index (RVI): How to Measure Market Momentum and Trend Strength
The Relative Vigor Index (RVI): How to Measure Market Momentum and Trend Strength
The Relative Vigor Index (RVI) is a momentum-based oscillator that helps traders analyze market trend strength by comparing closing and opening prices. Unlike other oscillators, RVI focuses on how strongly price moves in the direction of the trend, making it useful for trend confirmation and momentum shifts.
In this guide, we’ll break down how the RVI works, how to use it effectively, and the best trading strategies.
What Is the Relative Vigor Index (RVI)?
The RVI measures how much price closes relative to its opening price within a given period. It assumes that in a strong uptrend, prices close higher than they open, and in a downtrend, prices close lower than they open.
How to Interpret the RVI Indicator:
- RVI above zero → Bullish momentum (uptrend confirmation).
- RVI below zero → Bearish momentum (downtrend confirmation).
- RVI crossing above its signal line → Buy signal.
- RVI crossing below its signal line → Sell signal.
How the RVI Indicator Is Calculated
The RVI formula smooths price changes over a given period:
[
RVI = \frac{\sum (Close – Open)}{\sum (High – Low)}
]
Where:
- Close – Open measures daily price movement.
- High – Low accounts for market volatility.
- A signal line (Smoothed RVI) is used for trade confirmations.
The default RVI period is 10, but traders can adjust it based on volatility.
How to Use the RVI Indicator in Trading
Identifying Trend Strength
- If RVI is above zero and rising, momentum is bullish.
- If RVI is below zero and falling, momentum is bearish.
RVI Crossover Strategy
- A bullish crossover (RVI crosses above signal line) → Buy signal.
- A bearish crossover (RVI crosses below signal line) → Sell signal.
RVI Divergence Strategy
- Bullish Divergence: Price makes a lower low, but RVI makes a higher low → Potential trend reversal upward.
- Bearish Divergence: Price makes a higher high, but RVI makes a lower high → Potential trend reversal downward.
Best RVI Trading Strategies
RVI + Moving Average Strategy
- Buy when RVI crosses above the signal line and price is above the 50-day SMA.
- Sell when RVI crosses below the signal line and price is below the 50-day SMA.
RVI + RSI Strategy
- Buy when RVI is rising and RSI is below 30 (oversold).
- Sell when RVI is falling and RSI is above 70 (overbought).
RVI + MACD Strategy
- Use MACD crossovers to confirm RVI signals.
- If RVI is above zero and MACD is bullish → Strong buy signal.
- If RVI is below zero and MACD is bearish → Strong sell signal.
Best RVI Settings for Different Trading Styles
- Day Trading: Use a 5-period RVI for faster momentum shifts.
- Swing Trading: Default 10-period RVI for balanced momentum confirmation.
- Long-Term Investing: Use a 14-period RVI to smooth out short-term noise.
Common RVI Mistakes to Avoid
❌ Ignoring trend direction – Always confirm RVI signals with moving averages or price action.
❌ Overtrading on crossovers – Crossovers are more reliable in trending markets.
❌ Using RVI alone – Combine with MACD, RSI, or Bollinger Bands for better trade accuracy.
Final Thoughts – Should You Use the RVI Indicator?
The Relative Vigor Index (RVI) is a powerful momentum indicator for detecting trend strength, momentum shifts, and trade confirmations. When used with moving averages, RSI, or MACD, it enhances trade accuracy and market analysis.
📌 Want to Trade With the RVI Indicator?
Try applying RVI settings on different assets and test how it performs in trending vs. ranging markets!
