39 Relative vigor index (RVI)

The Relative Vigor Index (RVI) measures the strength of a trend by comparing a security’s closing price to its trading range while smoothing the results using a simple moving average (SMA).

In short, RVI looks at the difference between the current close price and the three prior closing prices (to assess rate of change in the closing price) and then divides that by the difference between the current high and the three prior lows. The expectation here is that prices closing higher than they open is an uptrend, and closing lower than they open is downtrend.

Figure 8.56: Relative vigor index equation

The crossover between the signal and the RVI can at times indicate price reversals.

Figure 8.57: Relative vigor index