Relative Volatility Index indicator

The Relative Volatility Index (RVI) is a technical analysis indicator that measures the direction and magnitude of volatility in a security's price movement. It is designed to help traders identify potential trend reversals and overbought or oversold conditions.

The formula for the Relative Volatility Index is as follows: RVI = (n-period Standard Deviation of Upward Price Changes) / (n-period Standard Deviation of Total Price Changes)

In this formula, the "n-period" typically refers to a certain number of trading days or weeks, depending on the timeframe being analyzed.

The RVI indicator is plotted on a chart as a line that fluctuates between 0 and 100. When the RVI line is above 50, it indicates that upward price changes are more volatile than total price changes, suggesting that bullish momentum is increasing. Conversely, when the RVI line is below 50, it indicates that downward price changes are more volatile than total price changes, suggesting that bearish momentum is increasing.

Traders use the RVI to identify potential trend reversals and overbought or oversold conditions. When the RVI line crosses above 50, it may indicate that buying pressure is increasing and that a potential bullish trend may occur. Conversely, when the RVI line crosses below 50, it may indicate that selling pressure is increasing and that a potential bearish trend may occur.

Traders may also use the RVI in conjunction with other technical analysis indicators, such as the Moving Average Convergence Divergence (MACD) or the Relative Strength Index (RSI), to confirm potential trend reversals. For example, if the RVI and MACD both indicate a bullish trend reversal, it may provide additional confirmation that a potential buying opportunity may exist.