The Relative Vigor Index (RVI) is a technical indicator that measures the vigor or strength of a market’s price movement over a given period. On BetPro Exchange, advanced RVI techniques can give traders unique insights into market momentum and emerging trends.
In this comprehensive guide, we’ll cover advanced topics like combining RVI with other indicators, using variable RVI periods, and incorporating RVI into automated strategies.
Understanding the Basics of RVI
Before diving into advanced strategies, it’s important to understand how the standard RVI indicator works.
What is Relative Vigor Index?
The Relative Vigor Index (RVI) is a bounded momentum oscillator that compares the magnitude of recent gains to recent losses over a specified timeframe. The formula is:
RVI = (Close – Open) / (High – Low)
It’s expressed as a percentage that fluctuates between 1 and -1. The higher the RVI reading, the stronger the price movement. Values above 0 indicate upside momentum, while values below 0 indicate downside momentum.
Interpreting Standard RVI Readings
There are a few key things to look for in standard RVI analysis:
- Overbought above 50 – Values over 50 indicate strong upside vigor that may be overextended
- Oversold below -50 – Values below -50 indicate strong downside vigor that may be overextended
- Crossovers of 0 – Crossovers above/below 0 signify a shift in momentum from bullish to bearish or vice versa
- Divergences – A divergence between price and RVI can foreshadow a trend reversal
Now that we’ve covered the essentials, let’s look at some advanced strategies for applying RVI in your trading.
Advanced RVI Techniques and Strategies
RVI becomes an even more powerful analytical tool when you apply advanced techniques. Here are some clever ways traders are using RVI on BetPro Exchange:
Combining RVI with Other Indicators
With Moving Averages
RVI and moving averages complement each other nicely. The moving average smoothes out volatility, while RVI gauges upside/downside momentum strength.
You can go long when RVI crosses above 0 while price trades above the 20-period MA. Exit longs when RVI crosses back below 0.
Conversely, you can go short when RVI crosses below 0 while price trades under the 20-period MA. Cover shorts when RVI crosses back above 0.
RVI combined with a 20-period moving average
With the MACD
The Moving Average Convergence Divergence (MACD) is another trend-following indicator that pairs well with RVI.
Since the MACD is good at identifying trend direction, you can use crossovers of its signal line to confirm RVI signals. Go long on bullish RVI 0 crossovers that align with MACD signal line crosses.
Entering long trades based on aligned RVI and MACD signal crossovers
Using Variable RVI Periods
The standard RVI setting is 14 periods. But experimenting with shorter or longer periods can reveal things you’d otherwise miss.
Faster RVI Periods
Setting the RVI to 5-7 periods makes it more sensitive to vigor shifts. This can help you catch reversals earlier.
But the faster RVI will chop around more. So combine fast RVI checks with slower settings (like 14-periods) to verify signal validity.
Slower RVI Periods
Conversely, longer 25-30 period RVI readings smooth out much of the short-term noise.
Slower RVIs help clearly identify enduring trend shifts. Just be aware longer periods also mean slower signals.
Incorporating RVI into Automated Strategies
RVI can also boost profits when incorporated into automated algorithms.
Identifying Trend Strength
Profitable algorithmic strategies rely on properly assessing trend strength. RVI helps by gauging upside/downside momentum.
You can program buys only when RVI readings exceed +25 and sells when RVI drops below -25. This avoids trading choppy or weak trends.
Setting Adaptive Take Profit Levels
Since higher RVI values indicate stronger vigor, the indicator can help set take profit levels accordingly.
The higher the RVI during entry, the further away you can set profit targets since vigorous trends often run further.
Optimizing Order Execution with RVI
Savvy BetPro Exchange traders also take advantage of RVI quirks around order execution.
Using RVI Extremes for Expiry Selection
Binary options traders know picking the optimum expiry is critical. Analyzing RVI before placing a CALL or PUT can optimize expiry selection.
When the RVI reading exceeds +75 when placing a CALL, select longer expiries since upside momentum is extremely strong.
Conversely, when RVI drops below -75 when placing a PUT, choose longer expiries to capitalize on intense bearish momentum.
RVI extremes help optimize binary options expiry selection
placements
During extended RVI extremes above +90 or below -90, there’s an increased chance of short-term exhaustion moves counter to the main trend.
Many BetPro traders avoid market orders during these churning RVI extremes. Instead they place resting limit orders just outside key levels, waiting for price to come to them after momentum resumes.
Conclusion: A Valuable Versatility
As we’ve demonstrated, RVI’s versatility makes it one of the most valuable tools for BetPro traders. It can improve returns as both a standalone indicator and when combined with other signals.
Savvy traders use the RVI in multiple timeframe analysis, fine-tune RVI periods, and incorporate it into manual and automated strategies. Mastering advanced RVI techniques takes time, but is well worth the investment for its profit unlocking potential.
Frequently Asked Questions
What timeframes work best for RVI analysis?
The RVI can be applied on charts ranging from 1-minute up to weekly. Lower timeframes like 5-15 minutes are best for catching short-term momentum shifts. While daily and weekly works well for assessing long-term trend strength. Multi-timeframe analysis taking both short and longer-term readings into account is recommended.
What trading strategies most complement RVI?
Trend following strategies are especially complementary to RVI since it measures market momentum. Specific methods like pullback, breakout and momentum trading work well with RVI for timing entries and exits. That said, countertrend mean reversion strategies can also use RVI to help identify exhaustion points to fade or reverse against the trend.
What RVI settings are best for beginners?
For newer traders still getting familiar with RVI, sticking to default standard settings of 14 periods while watching for overbought/oversold readings, reversals at 0, and divergences is best. Start here to grasp RVI basics before optimizing settings and incorporating multiple signals.
Should I use RVI on all currency pairs?
The RVI works effectively on virtually all liquid forex currency pairs like EUR/USD, GBP/USD and USD/JPY as well as major indices, commodities and cryptocurrencies. Less liquid pairs with wider spreads and more erratic swings can generate choppier RVI readings however. Adjusting your RVI periods to smooth signals makes sense on volatile pairs.
Is RVI more effective during certain trading sessions?
RVI can be utilized at all times. But its interpretive value is highest during active trading sessions with wider intraday price movement. For currencies, the London and New York overlaps generally see spikes in volatility and momentum ideal for RVI signal generation. Low volatility periods like Sunday night openings often result in muted RVI readings.