Relative Volatility Index (RVI) on Gold

What it shows

A purple 0 to 100 line under the candles, with guides at 80, 50 and 20 and the band between 20 and 80 shaded.

How Pravex works it out

1. Take the standard deviation of the Source over Length candles.
2. On a candle where the Source rose from the previous candle, that deviation goes into an up value and the down value is 0. On a candle where it fell or stayed flat, it goes into the down value instead.
3. Smooth the up values and the down values separately with an EMA over the smoothing length.
4. RVI = 100 × smoothed up ÷ (smoothed up + smoothed down).
5. For the arithmetic only: if the smoothed up value is 3 and the smoothed down value is 1, the RVI is 100 × 3 ÷ 4 = 75.

Settings

Setting	Default	What changing it does
Length	10	How many candles go into each standard deviation. A shorter Length makes the deviation jumpier.
Source	Close	The price used for the deviation and for deciding whether a candle counts as up or down.
Smoothing length	14	How strongly the up and down values are smoothed. A longer EMA gives a calmer line that reaches the outer lines less often.
Offset	0	Shifts the line by that many candles. Leave it at 0 unless you want to line it up against something else.

How traders read it

Over 80, nearly all the recent spread came on up candles; under 20, on down candles. Those two guides mark the stretched readings.

The 50 guide splits the two sides. A climb through it says the spread of gold’s closes is now larger on the candles that rise than on those that fall.

It is a volatility read, not a price one. Use it as a second opinion next to a trend measure, not as an entry on its own.

When it misleads

The RVI only looks at the direction of the move to sort the deviation, so a large gap down on one candle fills the down side for a long time. In a quiet range the sorting is close to random, and the line sits near 50 with small swings. A run of small candles and the first candle after a weekend gap can both skew a short window.

Questions and answers

What does the RVI add next to the RSI?

The RSI weighs the size of each close-to-close move. The RVI sorts the 10-candle standard deviation by up and down candles instead, so it was meant as a second opinion on an RSI or trend signal rather than a signal itself.

Is the Relative Volatility Index the same as the Relative Vigor Index?

No. They share the short form RVI. The Relative Volatility Index uses standard deviation, while the Relative Vigor Index uses open, close and range.

Why does one big drop keep the RVI low for so long?

That candle lifts the standard deviation, and every falling candle after it feeds that larger number into the down side. The 14-candle EMA then lets it fade only slowly.

Does an RVI above 80 mean price will fall?

No. It says that recent volatility has come mostly on up candles. In a strong trend it can stay there for a long time.

Related: Relative Vigor Index, Ulcer Index, Bollinger BandWidth, Relative Strength Index, every indicator.