RVI Archives - Trading Rush

Does the RVI Trading Strategy even work? This time, I took 200 Trades with the RVI indicator to see if it is better than other strategies we have tested so far. Since there are two widely used RVI Strategies as we saw in the RVI strategy video, I took 100 trades with the RVI strategy that gives signals when the pullback is big, and then another 100 trades with another one that focuses on the strong trends. Here’s what happened.

With the RVI strategy that gives entry signals when the pullback is big, the profit graph went in the upward direction till the first 20 or so trades, but many times the RVI indicator gave crossovers a bit early than the actual pullback, leading to one or two false signals just before the winning trade. This made the profit line go in the sideways direction for a while, and then at one point, the RVI indicator gave too many false signals in a row, and the profit line took a dive near the end. This deeper pullback RVI strategy, or in other words, when I took long RVI signals when the crossovers were below the zero line, and vice versa, the RVI strategy got a breakeven percentage. It didn’t make or lose money.

But when I took long RVI crossovers above the zero line, and short crossovers below the zero line, the profit graph looked very similar to the first strategy at the beginning. This one also won multiple trades in a row till the first 20 or so trades, and then the profit graph went in the sideways direction. But this time, the profit graph didn’t go in the downward direction as it did with the first strategy.

Both RVI strategies had their unique advantages and disadvantages. The first one was not giving entry signal at the top of the trend, but the second RVI strategy was, leading to false signals in the long run. The second strategy was not giving entry signals when the pullback was big, leading to fewer false signals when the trend was changing direction, whereas the first strategy was.

After 200 Trades, the RVI strategy where long signals were taken below the zero line, got a 40 percent approximate win rate with a 1.5 to 1 reward risk ratio. And the RVI strategy where long signals were taken above the zero line, got a 45 percent approximate win rate.

As we can see from the profit graph when the trend is strong, both strategies make money, but in the long run, the second RVI strategy is a bit better than the first one. When another good trend shows up, the profit line with the second strategy has more probability of going in the upward direction and staying there, while the first one has a decent chance of giving back the profit.

4+7.3+4+4+4

The first RVI strategy gets a TR Score of 23.3 out of 50 and ranks 30th from the top.

5+7.3+4+4+5

On the other hand, the second RVI strategy gets a TR Score of 25.3 out of 50 and ranks 23rd from the top.

That’s all.

Get App

Patreon

YouTube

Tag: RVI

Even your neighbor Bill knows that in an uptrend, the price closes higher than the opening price, and in a downtrend, closes lower than the opening price. This RVI Indicator, or Relative Vigor Index, is a momentum indicator and is based on the higher probability of price closing higher, than where it opened in an uptrend, and closing lower than where it opened in a downtrend. That’s good and all, but what’s the point of using the RVI indicator? Even though RVI looks like a Stochastic Indicator at first glance, it does not have the upper and lower bands. Instead, it oscillates around the zero line. When the RVI line is above its zero line, it’s an uptrend. And when the RVI line crosses below the zero line, it’s a downtrend.

But since the RVI line oscillates around the zero line, the Relative Vigor Index generates two different kinds of entry signals.

You see, in a strong uptrend, the price makes a move in the upward direction, then slows down a little, and makes a strong move in the upward direction again. In one of the widely used RVI strategies, you buy when the RVI line crosses above the signal line, only if the crossover is above the zero line. That makes sense because the RVI line above the zero line indicates an uptrend. But this strategy is only good if the price is really in a strong uptrend because when you buy at the RVI crossover above the zero line, you will most likely buy near the top of the trend. This makes the RVI strategy better for catching the small moves in the direction of the strong trends. Otherwise, buying at the top will lead to unnecessary losses in the long run.

But many people who are subscribed to the Trading Rush Channel, don’t like to buy, at the top of the uptrend. Many traders, especially those who are using strategies like the MACD are buying when the pullback is big, so the price has enough room to move in the upward direction before reaching the swing high resistance, and resulting in a higher probability of winning in the long run.

To only buy when the pullback is big, many traders buy when the RVI line crosses above the signal line, below the zero line. Remember, the RVI indicator is used to find the short term trend direction, and not the long term trend, But when you use a longer period moving average like the 200 Exponential Moving Average to find the trend direction, the price above the 200 period moving average, and the RVI below the zero line, indicates a temporary downward momentum in a long term uptrend.

When the RVI value is below the zero line, a Long RVI crossover indicates a potential end of the pullback and a signal to buy.

The short setup is just the opposite of the long setup. And in both the first and second RVI strategies, the stoploss can be set using the pullback of the trend.

To find the win rate of the RVI Trading Strategy, we will have to test it 100 Times in the next video.

That’s all.