Description:
The Relative Volatility Index (RVI) is a technical indicator developed by Donald Dorsey, who believed that a single technical indicator could not provide a comprehensive picture of market movements. It serves as a helpful tool for traders who aim to enhance the accuracy of their trading signals by using it as a confirming indicator alongside other trading tools. The RVI is based on the standard deviation of price changes, making it particularly valuable for gauging market volatility.
Input Parameters:
- Length: Number of periods used in the calculation.
- Signal: An Exponential Moving Average (EMA) line, typically a 9-day EMA.
- Upper: Presets to 80 which represents the upper boundary of the indicator.
- Lower: Presets to 20 which represents the lower boundary of the indicator.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Confirm Trading Signals: The primary purpose of the RVI is to serve as a confirming indicator for trading signals. It is most commonly used in conjunction with moving average crossover signals to enhance the accuracy and reliability of these signals.
- Combine with Other Indicators: Since the RVI is designed to confirm trade signals, it should be combined with other trading tools and methodologies. Traders can use the RVI alongside moving averages, trendlines, and other technical indicators to create a more comprehensive trading system that minimizes false signals and improves the overall effectiveness of their strategies.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.
May 17, 2024