relative volatility index(RVI)
Relative volatility index was developed by Donald Dorsey.
Relative volatility index is used to indicate the direction of the volatility of the market
Relative volatility index is considered to be similar to RSI except that it measures the standard deviation of price changes over a given period rather than the absolute price change.
Relative volatility index is an oscillator and therefore it oscillates from 0 all the way to 100.It is based on overbought and oversold in the market.
Relative volatility index is calculated the same way as Relative strength index except that instead of using price change,standard deviation of price change will be used in calculation
Since relative volatility index is an oscillator,it therefore follows that when RVI rises above 50 that will tell the trader to be trading upwards while while RVI falls below 50 that will tell the trader to be trading downwards.
Relative volatility index can also be used by a trader to know when to exit a market and enter a new market.This can be considered in such a way that when the Relative volatility index rises above 70,that will be an indication of an overbought in the market thus signaling the trader to exit any buy position and enter a sell position since the market will start moving downwards.On the other hand,if the RVI has fallen below 30,that will be an indication of an oversold in the market thus signaling the trader to exit any sell position and enter a buy position since the market will start moving upwards.This is indicated as from the candle sticks chart below;
From the candle sticks charts above,there are 3 points,point A,B and C. Point A represents the relative volatility index curve while point B and C represents point above 70(overbought) and point below 30(oversold) respectively.
At point C the relative volatility index has fallen below 30 thus an indication of an oversold market thus signaling the trader to close any sell position at that point and enter a buy position since the market is starting an uptrend while at point B,the relative volatility index has risen above 70 thus an indication of an overbought market thus signaling the trader to close any buy position and enter a sell position since the market is starting a downtrend.
Relative volatility index is used to indicate the direction of the volatility of the market
Relative volatility index is considered to be similar to RSI except that it measures the standard deviation of price changes over a given period rather than the absolute price change.
Relative volatility index is an oscillator and therefore it oscillates from 0 all the way to 100.It is based on overbought and oversold in the market.
Relative volatility index is calculated the same way as Relative strength index except that instead of using price change,standard deviation of price change will be used in calculation
Since relative volatility index is an oscillator,it therefore follows that when RVI rises above 50 that will tell the trader to be trading upwards while while RVI falls below 50 that will tell the trader to be trading downwards.
Relative volatility index can also be used by a trader to know when to exit a market and enter a new market.This can be considered in such a way that when the Relative volatility index rises above 70,that will be an indication of an overbought in the market thus signaling the trader to exit any buy position and enter a sell position since the market will start moving downwards.On the other hand,if the RVI has fallen below 30,that will be an indication of an oversold in the market thus signaling the trader to exit any sell position and enter a buy position since the market will start moving upwards.This is indicated as from the candle sticks chart below;
From the candle sticks charts above,there are 3 points,point A,B and C. Point A represents the relative volatility index curve while point B and C represents point above 70(overbought) and point below 30(oversold) respectively.
At point C the relative volatility index has fallen below 30 thus an indication of an oversold market thus signaling the trader to close any sell position at that point and enter a buy position since the market is starting an uptrend while at point B,the relative volatility index has risen above 70 thus an indication of an overbought market thus signaling the trader to close any buy position and enter a sell position since the market is starting a downtrend.
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