Relative Vigor Index - RVI: description, adjustment and application

Relative Vigor Index Technical Indicator (RVI) is based on the fact that the closing price is usually higher than the opening price at the bull market. The situation is opposite on the bear market. As a result the move vigor is established by the position when the price is at the end of the period. To normalize the index to the daily trading range, price change is divided to the maximum range of prices during the day. For more detailed calculations Simple Moving Average is used. 10 is the best period. To avoid probable troubles one needs to construct an additional signal line, which is a 4-period symmetrically weighted moving average of Relative Vigor Index values. The signal to buy or sell is received when lines cross each other.

Calculation

RVI = (CLOSE-OPEN)/(HIGH-LOW)

Where:
OPEN - is the opening price;
HIGH - is the maximum price;
LOW - is the minimum price;
CLOSE - is the closing price.