The Relative Vigor Index (RVI) Indicator is a technical analysis tool that helps traders identify the strength of a trend and potential trend reversals. In this article, we will discuss the definition, working, and best settings of the Relative Vigor Index Indicator, and how to use it to trade in MT5.
Definition
The Relative Vigor Index (RVI) Indicator is a technical analysis tool that measures the strength of a trend and potential trend reversals. The indicator was developed by John Ehlers and is based on the principle that the momentum of the market is more important than the price.
Working of Relative Vigor Index Indicator in MT5
The Relative Vigor Index Indicator works by measuring the difference between the opening and closing prices of a certain period and comparing it to the trading range of the period. The indicator uses a smoothed moving average to filter out market noise and generate more accurate signals.
The Relative Vigor Index Indicator can be used to identify potential trend reversals and adjust trading strategies accordingly.
Best Settings for Relative Vigor Index Indicator
The best settings for the Relative Vigor Index Indicator depend on the trading strategy and the time frame being used. Generally, a shorter time frame, such as 5 minutes or 15 minutes, is used for intraday trading, while a longer time frame, such as 1 hour or 4 hours, is used for swing trading.
Traders can also adjust the sensitivity of the Relative Vigor Index Indicator by changing the smoothing period used in the calculation. A shorter period will result in a more sensitive indicator, while a longer period will result in a smoother indicator.
Table of Best Settings for Relative Vigor Index Indicator
The table below shows the best settings for the Relative Vigor Index Indicator for different time frames:
| Time Frame | Smoothing Period | Color |
|---|---|---|
| Intraday | 5 | Blue |
| Swing | 10 | Green |
Traders can also customize the appearance of the Relative Vigor Index Indicator by changing the color of the lines and other settings.
How to Trade with Relative Vigor Index Indicator?
The Relative Vigor Index Indicator can be used to identify potential trend reversals and adjust trading strategies accordingly. Here are two common ways to use the Relative Vigor Index Indicator to trade in MT5:
Trade Trend Reversals
Traders can use the Relative Vigor Index Indicator to identify potential trend reversals in the market. When the indicator value crosses above the 50 line, it generates a buy signal, indicating that the market may be entering an uptrend. When the indicator value crosses below the 50 line, it generates a sell signal, indicating that the market may be entering a downtrend.
Use as a Confirming Indicator
Traders can also use the Relative Vigor Index Indicator as a confirming indicator to validate other technical analysis tools or trading signals. For example, if a trader receives a buy signal from another technical analysis tool, they can use the Relative Vigor Index Indicator to confirm that the market momentum is strong and that the buy signal is more likely to be successful.
Features of Relative Vigor Index Indicator
The Relative Vigor Index Indicator has several features that make it a useful tool for traders. Some of these features include:
- Measures the strength of a trend and potential trend reversals
- Can be used to identify potential trend reversals and adjust trading strategies accordingly
- Customizable settings to suit different trading strategies
Conclusion
The Relative Vigor Index (RVI) Indicator is a powerful tool that can help forex traders identify the strength of a trend and potential trend reversals. By incorporating the Relative Vigor Index Indicator into their trading approach, traders can gain an edge in the markets and improve their chances of success.