Relative Vigor Index for Automated Trading

The Relative Vigor Index (RVI) indicator measures the strength of a price trend by comparing where price closes relative to its trading range. The core principle: in uptrends, closing prices tend to be higher than opening prices, and in downtrends, the opposite holds.

Here are Relative Vigor Index strategy examples ready for automation in Tradeworks:

RVI normalizes price change against the daily range and smooths the result with a Simple Moving Average (standard period: 10). A 4-period symmetrically weighted signal line accompanies the main RVI line. The interaction between these two lines generates trading signals.

Key characteristics for algo trading

• Oscillates around a zero line: Positive = bullish momentum, negative = bearish momentum
• Signal-line crossovers: Provide entry/exit triggers
• Zero-line crossovers: Confirm trend direction changes
• Normalized output: Makes threshold-based automation straightforward

Combining with Other Indicators

RVI works as a momentum confirmation tool. Combine it with trend or volatility indicators for stronger signals:

• Moving Average (MA): Use MA direction as a trend filter - only take RVI long signals when price is above the MA, and short signals when below.
• Average True Range (ATR): Use ATR for dynamic stop placement rather than fixed pip values. This adapts to current volatility.
• Relative Strength Index (RSI): RSI below 40 combined with a bullish RVI crossover identifies oversold momentum shifts. RSI above 60 with bearish RVI crossover identifies overbought reversals.
• Bollinger Bands: When price touches the lower band and RVI crosses its signal line upward, it signals a potential bounce with momentum confirmation.

Important Notes

• RVI is a momentum-based indicator - it works with the assumption that bullish markets close higher than they open. In ranging/sideways markets, expect more false signals.
• The standard period of 10 is widely used. Shorter periods (e.g., 7) increase sensitivity but generate more noise.
• RVI cannot detect divergence patterns automatically in Tradeworks. Traders can visually inspect for RVI/price divergence, but this pattern detection cannot be automated with the available operators.
• Use the signal-line crossover (RVI crosses its signal line) for entries, and the zero-line crossover (RVI crosses zero) for trend direction confirmation.

Manageable Beginner Setup

1. Indicator: Relative Vigor Index, period 10
2. Entry (Long): RVI value crosses from below to above RVI signal line value
3. Entry (Short): RVI value crosses from above to below RVI signal line value
4. Stop Loss Exit Signal: Strategy symbol BID price is less than Previous bar low minus (1.5× ATR(14) value) [for longs]
5. Take Profit Exit Signal: Strategy symbol BID price is greater than Previous bar close plus (2× ATR(14) value) [for longs]
6. Pair: EUR/USD
7. Timeframe: H4
8. Backtest first: Run a minimum 6-month backtest before live trading