Calculate the Relative Vigor Index in Technical Analysis

By Stock Research Pro • October 18th, 2009

The Relative Vigor Index (RVI) is used by technical analysts under the theory that prices tend to close higher than their open in upward-trending markets and lower than their open in downward-trending markets. Thus the “vigor” of the move is determined by where the prices are at the close of market. Originally constructed by John Ehlers and calculated in a manner similar to the stochastic oscillator, the RVI is essentially the normalized difference between the close and open.


Calculate the Relative Vigor Index

The formula for the relative vigor index can be written as:


RVI = (Close – Open) / (High – Low)

Where:

Open = opening price
High = maximum price
Low = minimum price
Close = closing price

The idea behind the relative vigor index is that closing prices are generally higher than opening prices during bull markets and lower than opening prices during bear markets. Many technical analysts expect the RVI value to grow as a bullish trend emerges.


The Relative Vigor Index as a Moving Average

The RVI is often used to create a simple moving average, often ten days in length. For comparison, a “fast” RVI line can be used to track consensus over a short time period against a “slow”, longer period price consensus. When the fast line crosses above the slow line, it would be considered a buy signal. Conversely, the fast line crossing below the slow line would indicate a sell signal.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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