Most traders don’t know that the “RVI, or Relative Vigor Index” indicator gives very accurate trading signals for both scalping and swing trading. But don’t worry, in this tutorial, you’ll learn and master how to use the RVI indicator like the PROS on Wall Street.
Like every other indicator, the RVI can produce false signals. Therefore, I strongly suggest you combine the relative vigor index with additional trading tools to identify head fakes. Due to the risk of false signals, we will now cover 5 Trading Strategies using the RVI:
And now, Here are 5 Trading Strategies using the RVI Trading Indicator.
1. RVI and the Stochastic Oscillator
Stochastic is a leading indicator as it gives us advanced signals before it is reflected in the price behavior. Stochastic is a two-line indicator that oscillates between 0 and 100. If the value crosses 80, it is considered an Overbought zone, and any value below 20 is considered an Oversold zone.
The stochastic indicator provides information about momentum and trend strength. The indicator analyzes price movements and tells us how fast and how strong the price moves.
- TheBUY signal is generated when the %K line of the stochastic crosses above the %D line, Stochastic is above 50 after moving higher from the oversold zone, and the RVI line is above the signal line.
2. RVI and the Relative Strength Index Strategy
Both the RSI and the RVI are oscillators, but their different qualities can help traders to pick out high-quality RSI trading opportunities in the market.
In this strategy, the RSI focuses on trend momentum, whereas the computation of RVI seeks to relate closing prices to open prices.
The RSI gives information on the strength of price movement, with positive values, or above 50 level, indicating increasing momentum, whereas negative values, or below 50 level, denote decreasing momentum.
The RSI is the best indicator to complement or qualify the signals delivered by the RVI, especially in trending markets.
In this setup, we’re looking to BUY.
- We want to see the RSI showing a bullish condition, or above the 50 level and the RVI making a bullish cross. Then we can go long.
- This trading method is easy to use and very accurate for both scalping and swing trading.
- You can increase the accuracy of the strategy by using candlestick patterns as triggers to open positions.
3. RVI and The MACD Crossover System
MACD is a great technical indicator to confirm the setups, locate and follow the trends, no matter what trading system you trade. The MACD is one of the most popular technical indicators that does a very good job of detecting momentum.
And a common way of using the MACD is by taking a buy position if the MACD line crosses above the signal line, and taking a cell position if the MACD line crosses below the signal line.
However, this strategy only works if the market is trending. if the market is moving sideways the MACD often gives false signals.
So that is why for this combination strategy we are not going to buy or sell just because the MACD crosses over, instead we are using it to give extra confirmation and making sure that the momentum is on our side.
- Download “TraderVersity-RVIMACDsystem” (Zip/RAR File).
- Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
- Copy the “TraderVersity-RVIMACDsystem.tpl” file (template) to your Metatrader Directory …/templates /
- Start or restart your Metatrader Client.
- Select Chart and Timeframe where you want to test your forex system.
- Right-click on your trading chart and hover on “Template”.
- Move right to select “TraderVersity-RVIMACDsystem” trading system and strategy.
- You will see the “TraderVersity RVI-MACD System” system is available on your Chart.
When seeking to open BUY positions, observe indicator readings as follows:
- To identify a BUY signal, the first step is you want to look at the RVI oscillator making a bullish cross.
- The next step is you want to use the MACD to confirm the upwards momentum by waiting for the MACD line to cross above the signal line.
- If all the rules were met you take a buy position.
- Your exit strategy: If you took buy positions you want to place your stop loss below the nearest swing low and set your profit target at 1, or 2 times your stop loss.
When seeking to open SELL positions, observe indicator readings as follows:
- To identify a SELL signal, the first step is you want to look at the RVI oscillator making a bearish cross.
- The next step is you want to use the MACD to confirm the downwards momentum by waiting for the MACD line to cross below the signal line.
- If all the rules were met you take a SELL position.
- Your exit strategy: If you took SELL positions you want to place your stop loss above the nearest swing high and set your profit target at 1, or 2 times your stop loss.
In this tutorial, I’ll share a straightforward and effective scalping and swing trading strategy that combines three Exponential Moving Averages (EMA) with the Relative Vigor Index indicator.
I’ll explain the strategy and provide numerous examples of where to place your take profit target, entry point, and stop-loss.
To begin, you’ll need three EMAs:
- a 20-period EMA in RED,
- a 50-period EMA,
- and a 100-period EMA.
Let’s dive into the details of this strategy. Let’s take a look at two setups for the “Relative Vigor Index and three Moving Averages” Trading Strategy.
For instance, In the first setup, we’re looking to buy. In this chart, the 20-period EMA is above the 50, and the 50 is also above the 100.
So, first we’re waiting for the pullback into the Exponential Moving Averages, and for the RVI oscillator lines to reach the oversold area.
once the RVI indicator making a bullish cross above the center line, we can take a long position, and place our stop loss below the nearest swing low, or below the 50-period Exponential Moving Average.
This trading strategy involves combining the Relative Vigor Indicator with Bollinger Bands. The Bollinger Bands indicator has a default 20-period Simple Moving Average (SMA) and two bands (upper and lower).
Here are the rules for entering a short position using Bollinger Bands. The recommended timeframe for this strategy is the daily chart.
- There should be a clear uptrend on the daily chart.
- The price bar should close outside the upper Bollinger band line.
- The sell signal occurs when the quick (green) RVI line crosses the slow (red) signal line from above in the overbought area. After the reversal is confirmed on the price chart, you can open a selling position and put your Stop Loss behind the local high.
Most traders don’t know that the “RVI, or Relative Vigor Index” indicator gives very accurate trading signals for both scalping and swing trading.
Just like other trading signals that are highly accurate, perfect RVI signals are hard to come by. However, they are highly accurate and easy to recognize. That’s why it’s crucial for all traders to thoroughly learn and understand this analytical technique.