# Relative Vigor Index (RVI): Definition, Formula, and Uses in Trading

## What Is the Relative Vigor Index?

The Relative Vigor Index (RVI) is a [momentum indicator](https://www.investopedia.com/investing/momentum-and-relative-strength-index/) used in technical analysis. It 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)](https://www.investopedia.com/terms/s/sma.asp).

The RVI's usefulness is based on the observed tendency for prices to close higher than they open during uptrends, and to close lower than they open in downtrends.

### Key Takeaways

*   The Relative Vigor Index (RVI) is a technical momentum indicator.
*   The RVI uses a simple moving average to smooth out price fluctuations, allowing traders to more easily identify trends.
*   The RVI oscillates across a pre-determined center line rather than a banded trend.
*   Divergences between the RVI indicator and price suggest there will be a near-term change in the trend.
*   The RVI is most useful in trending markets. In rangebound markets, it risks generating false signals.

![Image](https://www.investopedia.com/thmb/3Fza2sbq0CGfEf9pzag1FDhOnOg=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_INV-final-Relative-Vigor-Index-RVI-May-2021-01-2e1c1c13ed904686ad5b3140c84cda1a.jpg)

*— Image by Sabrina Jiang © Investopedia 2021*

## The Formula for the Relative Vigor Index (RVI)

The RVI formula may look complicated, but it is really fairly intuitive:

$\begin{aligned} &\text{NUMERATOR}=\frac{a+(2\times b)+(2\times c)+d}{6}\\[7pt] &\text{DENOMINATOR}=\frac{e+(2\times f)+(2\times g)+h}{6}\\[7pt] &\text{RVI}=\frac{\text{SMA of NUMERATOR for $N$ periods}}{\text{SMA of DENOMINATOR for $N$ periods}}\\[7pt] &\qquad\text{\ Signal Line }=\frac{\text{RVI}+(2\times i)+(2\times j)+k}{6}\\[7pt] &\textbf{where:}\\ &a = \text{Close}-\text{Open}\\ &b=\text{Close}-\text{Open One Bar Prior to }a\\ &c =\text{Close}-\text{Open One Bar Prior to }b\\ &d =\text{Close}-\text{Open One Bar Prior to }c\\ &e =\text{High}-\text{Low of Bar }a\\ &f =\text{High}-\text{Low of Bar }b\\ &g =\text{High}-\text{Low of Bar }c\\ &h =\text{High}-\text{Low of Bar }d\\ &i = \text{RVI Value One Bar Prior}\\ &j = \text{RVI Value One Bar Prior to }i\\ &k = \text{RVI Value One Bar Prior to }j\\ &N = \text{Minutes/Hours/Days/Weeks/Months} \end{aligned}$

### How To Calculate the Relative Vigor Index (RVI)

1.  Choose an N period to examine.
2.  Identify the open, high, low, and close values for the current bar.
3.  Identify the open, high, low, and close values for lookback periods prior to the current bar.
4.  Calculate SMAs for NUMERATOR and DENOMINATOR over the N period.
5.  Divide NUMERATOR value from DENOMINATOR value.
6.  Place the result in the signal line equation and plot it on a graph.

## What Does the Relative Vigor Index (RVI) Tell You?

The RVI indicator is calculated in a similar fashion to the [stochastics oscillator](https://www.investopedia.com/terms/s/stochasticoscillator.asp) but it compares the close relative to the open rather than comparing the close relative to the low. Traders expect the RVI value to rise as the bullish [trend](https://www.investopedia.com/terms/t/trend.asp) gains momentum because, in this positive setting, a security's closing price tends to be at the top of the range while the open is near the low of the range. In other words, during an uptrend, prices often close higher than they open, while during a downtrend, prices often close lower than they open.

The RVI is interpreted in the same way as many other oscillators, such as [moving average convergence-divergence (MACD)](https://www.investopedia.com/terms/m/macd.asp) or the [relative strength index (RSI)](https://www.investopedia.com/terms/r/rsi.asp). While oscillators tend to fluctuate between set levels, they may remain at extreme levels over a prolonged period of time so that interpretation must be undertaken in a broad context to be actionable.

The RVI is instead a centered [oscillator](https://www.investopedia.com/terms/o/oscillator.asp) and not a banded (trend-following) oscillator, which means that it's typically displayed above or below the price chart, moving around a center line rather than the actual price. It's a good idea to use the RVI indicator in conjunction with other forms of [technical analysis](https://www.investopedia.com/terms/t/technicalanalysis.asp) in order to find the highest probability outcomes.

## Example of How To Use the Relative Vigor Index (RVI)

A trader might examine potential changes in a trend with the RVI indicator by looking for divergences with the current price. The trader would then identify specific entry and exit points with traditional [trendlines](https://www.investopedia.com/terms/t/trendline.asp) and chart patterns.

The two most popular trading signals include:

*   **RVI Divergences**: Divergence between the RVI indicator and price suggests there will be a near-term change in the trend in the direction of the RVI's trend. So, if a stock price is rising and the RVI indicator is falling, it predicts the stock will [reverse](https://www.investopedia.com/terms/r/reversal.asp) over the near term.
*   **RVI Crossovers**: Like many oscillators, the RVI has a [signal line](https://www.investopedia.com/terms/s/signal_line.asp) that's often calculated with price inputs. A crossover above the signal line is a bullish indicator, while a crossover below the signal line is a bearish indicator. These [crossovers](https://www.investopedia.com/terms/c/crossover.asp) are designed to be leading indicators of future price direction.

> **Important**
>
> The RVI works best in trending markets. It tends to generate false signals in rangebound markets. Results can be improved by setting longer-term lookback periods, which help to reduce the impact of whipsaws and short-term countertrends.

## What Is Technical Analysis in Trading?

Technical analysis is a trading strategy that uses data on statistical trends to evaluate trends and make investment or trading decisions. It focuses on the study of price and volume, using data from price movements and trading volume to analyze how trends are likely to change. This is different from fundamental analysis, which uses data about the company underlying the asset to make investment or trading decisions.

## Is the Relative Vigor Index a Leading or Lagging Indicator?

The Relative Vigor Index is considered a leading indicator, meaning it changes before the trend changes. The RVI signals that a trend change is likely in the future when its value diverges from the current behavior of the asset's price.

## What Type of Indicator is the Relative Vigor Index?

The Relative Vigor Index is a momentum indicator. These are leading indicators that evaluate the speed of price changes over time. Other types of technical indicators include trend indicators (lagging), mean reversion indicators (lagging) relative strength indicators (leading), and volume indicators (leading or lagging).

  

## The Bottom Line

The Relative Vigor Index (RVI) is a momentum indicator used in technical analysis. It smooths out price fluctuations using a simple moving average, which makes trends easier to identify for traders.

When the RVI indicator and the price of an asset diverge, this suggests that the current price trend is likely to change. As an indicator, it is most useful in trending markets. The Relative Vigor Index may generate false signals in rangebound markets.  

> **Article Sources**
>
> 1.  Trading View. "[Relative Vigor Index](https://www.tradingview.com/support/solutions/43000591593-relative-vigor-index/)."