The RVI indicator is a pretty good indicator which can be used in various ways to identify reversals. Although the creator of the Relative Vigor Index is unknown, it was developed by John Ehlers to be a popular member of the “Oscillator” family of technical indicators.
RVI consists of two lines – the “Green” line, which is the smoother RVI values, and the “Red” signal line. It is a “leading” indicator” that signals a change in trend is imminent, especially when lines overlap within extreme overbought and oversold regions. RVI is also could be used within convergence/divergence patterns analysis.
The indicator is calculated by using the following formula:
Choose a period value of 14, but “10” is preferred and then, try to use the signals as follows:
*When the moving average, or the RVI, penetrates the signal line to the downside, this is a sell signal.
*A crossover of the RVI over the signal line to the upside is a buy signal.
On the daily chart below of AUDUSD pair, we can easily enumerate good seven signals from nine appeared on the indicator during the previous four months.