Relative Vigor Index (RVI): A Practical Guide for Indian Traders

What the Relative Vigor Index Actually Measures

The Relative Vigor Index (RVI) was published by John Ehlers and rests on one durable market observation. In a healthy uptrend, buyers stay in control into the close, so the candle tends to close above its open. In a downtrend, sellers dominate the last prints and the candle closes below its open. The RVI turns that idea into a single oscillating number by comparing where price closed versus opened against the full bar range. When closes are consistently strong relative to the day's range, the RVI rises; when closes are weak, it falls.

This is a different question from what the RSI or stochastic ask. Those compare the close to a past price window. The RVI instead asks how much conviction showed up inside each candle by using the open, high, low and close together. That makes it a momentum and trend confirmation tool rather than an overbought or oversold meter. On the NSE this matters because index futures and options, like Nifty and Bank Nifty, often gap on the open and then trend, so the close-versus-open relationship carries real information about who won the session.

One caution before any numbers. The RVI is unbounded in theory but in practice oscillates roughly between about minus 1 and plus 1 for liquid instruments, because the smoothed numerator can never exceed the smoothed range. A reading near plus 0.5 is genuinely vigorous buying, near minus 0.5 is vigorous selling, and readings hovering around zero mean the candles are closing near their open, which is the signature of an indecisive, range-bound tape.

The Correct RVI Formula, Step by Step

Many web write-ups, including the older version of this page, describe the RVI as just averaging (Close minus Open) divided by (High minus Low). That captures the intuition but it is not the actual Ehlers calculation, and using the plain average will not match what your charting platform plots. The real RVI smooths both parts with a symmetric 1, 2, 2, 1 weighting before taking the ratio. Here are the exact four steps.

• Numerator per bar = Close minus Open. Denominator per bar = High minus Low.
• Smooth each one over four bars using weights 1, 2, 2, 1 divided by 6. For the current bar that is: (today + 2 times yesterday + 2 times the day before + the day before that) divided by 6.
• RVI line = (10-bar sum of smoothed numerators) divided by (10-bar sum of smoothed denominators). This is the same as the average of the smoothed numerators divided by the average of the smoothed denominators.
• Signal line = (RVI today + 2 times RVI yesterday + 2 times RVI two days ago + RVI three days ago) divided by 6. The Signal is just the RVI run through the same 1, 2, 2, 1 smoother.

Fully Worked Example on Reliance, Finished With Real Numbers

Here is the worked example the old page set up but never finished. We use 13 illustrative daily candles for Reliance Industries on the NSE. The levels are realistic for the stock but are illustrative only, not a live quote and not a prediction. We need 13 bars because the smoothing eats the first three bars and the 10-bar ratio needs ten smoothed values. Below is the raw data with the two building blocks, Close minus Open and High minus Low.

Now apply the 1, 2, 2, 1 over 6 smoother to each column starting at bar 4. As a sample, the smoothed numerator at bar 4 is (3 plus 2 times negative 5 plus 2 times 7 plus 6) divided by 6, which equals 13 divided by 6, or 2.1667. The smoothed denominator at bar 4 is (14 plus 2 times 12 plus 2 times 13 plus 12) divided by 6, which equals 76 divided by 6, or 12.6667. Repeating this for bars 4 through 13 gives the smoothed series below.

The final step is the 10-bar ratio at bar 13. Add the ten smoothed numerators (bars 4 through 13): the total is 52.0, so the average is 5.20. Add the ten smoothed denominators: the total is 139.83, so the average is 13.98. The RVI is 5.20 divided by 13.98, which equals 0.3719. A reading of plus 0.37 says Reliance is closing firmly in the upper part of its daily range, so the up move has genuine vigor behind it rather than being a drift. If you then smooth the RVI series itself with the same 1, 2, 2, 1 weights you get the Signal line, and the RVI sitting above its Signal confirms the bullish read.

Reading the Two Lines: Crossovers and the Zero Line

On a chart the RVI plots two lines that move together: the RVI line and the smoother Signal line. The standard playbook is straightforward. When the RVI crosses above its Signal line while both are near or below zero, it flags building bullish vigor and a possible long entry. When the RVI crosses below its Signal line while both are elevated, it flags fading vigor and a possible exit or short. The zero line is the second filter: sustained readings above zero confirm an uptrend bias, readings below zero confirm a downtrend bias.

The most valuable signal is divergence. If Nifty futures print a higher high but the RVI prints a lower high, the new high was made with less closing conviction than the previous one, which often precedes a stall or pullback. The reverse, price making a lower low while the RVI makes a higher low, warns that selling pressure into the close is drying up. On Indian indices these divergences are most reliable on the daily and 15-minute timeframes and least reliable in the final 30 minutes of a weekly expiry session, when option writers force unusual closes.

• Bullish trigger: RVI crosses above the Signal line, ideally from below zero.
• Bearish trigger: RVI crosses below the Signal line, ideally from above zero.
• Bullish divergence: price makes a lower low but RVI makes a higher low.
• Bearish divergence: price makes a higher high but RVI makes a lower high.
• Trend filter: only take long crossovers when RVI is above zero, and shorts when it is below zero.

Best RVI Settings for Indian Instruments

The default 10-period RVI is the right starting point for positional and swing trading on daily charts of Nifty, Bank Nifty and large caps like Reliance, HDFC Bank, TCS and Infosys. It captures a one-to-two week swing without reacting to every single candle. For intraday index trading the default is too slow. On 5-minute Bank Nifty charts a 5 or 8 period RVI tracks the faster rhythm of option premium decay and gives crossovers in time to act, at the cost of more false signals that you must filter with VWAP or volume.

A practical note for Indian markets: avoid acting on RVI crossovers in the first 15 minutes after the 9:15 open and in the last 20 minutes before the 3:30 close, because volatility around the auction periods produces wild bar ranges that distort the High minus Low denominator. The cleanest RVI reads on Nifty and Bank Nifty usually come in the 10:00 to 14:30 window once the opening range has settled.

Worked Trade Example: Bank Nifty Options With Rupee P&L

Indicators only matter when they touch your account, so here is the RVI applied to a real instrument with the cash math. Assume Bank Nifty is trading near 51,000 on a 15-minute chart. The RVI is at minus 0.05 and crosses above its Signal line just as price reclaims VWAP. You read this as building bullish vigor and decide to buy a slightly out-of-the-money weekly call. Bank Nifty's lot size is 30. You buy 2 lots of the 51,200 call at a premium of 180.

• Quantity = 2 lots times 15 = 30 units.
• Entry cost = 30 times 180 = Rs 5,400 of premium paid.
• The RVI keeps rising above zero and price trends up. You exit when the RVI rolls back under its Signal line, with the call now at a premium of 320.
• Exit value = 30 times 320 = Rs 9,600.
• Gross profit = 9,600 minus 5,400 = Rs 4,200 before costs.

Now the costs, which retail traders routinely forget. On options, STT is 0.15% on the sell-side premium, so 0.15% of Rs 9,600 is about Rs 14.4. A typical discount broker charges a flat Rs 20 per order, so roughly Rs 40 for the buy and sell legs combined. Exchange transaction charges, SEBI fees, stamp duty and 18% GST on brokerage and transaction charges together usually add another Rs 30 to Rs 60 on a trade this size. Rounding the all-in costs to about Rs 110, your net profit is roughly Rs 4,090. The point is not the exact paise but the discipline of subtracting costs before you call a trade a winner. This is an illustrative scenario, not a return you should expect to repeat.

Combining RVI With Other Indicators

The RVI is strongest when it agrees with a separate, independent signal. Because the RVI measures closing conviction, pairing it with a tool that measures something else, such as trend strength or location, removes a lot of its false signals. The combination most Indian intraday traders rely on is RVI plus VWAP: only take a bullish RVI crossover when price is above VWAP, and a bearish one when price is below VWAP. For swing trades on the daily chart, RVI plus MACD works well because a shared bullish reading from two momentum tools is more trustworthy than either alone.

The one combination to avoid is stacking two indicators that measure the same thing, such as RVI plus stochastic plus RSI. They will usually agree, which feels reassuring but adds no real confirmation and tempts you to over-trade. A clean setup is one conviction tool (RVI), one trend or location filter (VWAP, EMA or ADX), and a risk rule.

Limitations and When RVI Fails

The RVI has two structural weaknesses that you must respect. First, it is a smoothed, lagging indicator. The very 1, 2, 2, 1 and 10-bar smoothing that makes it readable also delays its turns, so in a sharp Bank Nifty reversal the RVI can still be pointing up while price has already dropped 200 points. Second, it produces frequent whipsaws in sideways markets. When Nifty grinds in a tight 100-point range, candles close near their open, the RVI hugs zero and crosses its Signal line repeatedly without any move to trade. Acting on every crossover in that environment is the fastest way to bleed capital through costs.

There are also India-specific traps. Around weekly and monthly expiry, option writers can pin the index near a strike, producing artificial closes that distort the close-versus-open signal. Stocks that gap on news, such as an earnings surprise from Infosys or a regulatory headline on a bank, create a single huge candle that skews the smoothed range for several bars afterwards. In all these cases the RVI is technically working correctly but the underlying assumption, that closes reflect orderly buyer or seller conviction, has broken down.

• Lags in fast reversals, so never use it as your only exit trigger.
• Whipsaws when ADX is below 20, so add a trend filter.
• Distorted around weekly and monthly expiry pinning.
• A single news gap can skew the smoothed range for several bars.
• Always confirm with price action or a second, independent indicator.

RVI Across Trading Styles and Sectors

The same RVI logic flexes across timeframes. A day trader on Bank Nifty 5-minute candles uses a fast 5 to 8 period RVI and treats a crossover as a 20 to 40 minute trade idea, exiting on the opposite crossover. A swing trader on a daily TCS or HDFC Bank chart uses the default 10 period and holds for a one to two week move, using divergence as the early warning to book profit. A long-term investor rarely trades off the RVI directly but may use a weekly RVI to confirm that a fundamentally chosen stock is entering a phase of genuine accumulation rather than a dead-cat bounce.

Sector behavior matters too. The IT pack (Infosys, TCS, Wipro) tends to trend smoothly, so RVI crossovers there are cleaner. Banking names and the Bank Nifty index are more volatile and reactive to RBI policy, so RVI signals need tighter VWAP and volume filters. FMCG and pharma names move slower, which suits the default daily RVI well. Reading the RVI across a basket, for example seeing it turn up across all major banking stocks at once, is a stronger signal than any single chart and can confirm a genuine sector rotation rather than a one-stock move.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia, NSE India and Reserve Bank of India. You may also find our guide on the Relative Strength Index and our position size calculator useful. Always confirm current rules, rates and contract specifications on the official source before you trade.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia, NSE India and Reserve Bank of India. Always confirm current rules, rates and contract specifications on the official source before you trade.