Relative Vigor Index (RVI) Indicator

The Relative Vigor Index or RVI is a technical indicator used to measure the strength or conviction or a recent price action and the possibility of this movement to continue. This indicator was first described in the magazine TechnicalAnalysis of Stocks and Commodities in an article titled “Something Old, Something New – Relative Vigor Index (RVI)” by John Ehlers. Basically the RVI combines old concepts of technical analysis with modern theory of digital signal processing and filters so that it is an indicator that is both useful and practical.

The base of the RVI is simple: prices tend to close higher compared to the market opening in a bullish market (a market with an uptrend) and close lower than the opening in a bearish market (a market with and a downtrend). The energy or force of the movement is thus established by the point or level where the price closes compared with the opening price. In this case the RVI is essentially based on the measuring of the average difference between the closing and opening prices, normalized to the average daily trading range.

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