Type: Trend strength indicator

Introduction:

The RAVI serves the statement whether the trend strength increases or decreases and is used with many automated tradingsystems as a filter for sideward movement.

The RAVI was developed by Tushar Chande in 1997 and is an advancement of the ADX. Two moving averages are used and the shorter should put out approx. 10% of the long-term Moving Averages (often one finds for the short period 7 days and for the long period 65 days. A trend market is given with 7 / 65th Moving Averages constellation if the RAVI is more than 3%, a rank market against it should show a RAVI with less than 3%. The higher the RAVI, the stronger the trend. A falling RAVI after a top should display the trend end. After longer trendless phases the RAVI should fall less than 0.5 to 1%, at the same time is to be calculated the beginning of a new trend.

Formula/calculation:
From a short simple sliding average line is subtracted a longer one over seven closing prices.
The result is divided by the longer period, is multiplied by 100 and the algebraic sign is inhibited (feature ABS).
The result (RAVI) is expressed in percent. Instead of 7 days and 65 days (standard setting) other period preferences can be also used and the longer period should put out approx. the tenfold of the shorter period.

The RAVI calculation follows after following formula:

RAVI=ABS(100*(GDL(short_Periode)-GDL(long_Period))/GDL(long_Period))

Interpretation:

• The RAVI displays not the direction of the trend, but exclusively the development of the movement! 

• A RAVI less than 3% displays a sideward trend, an ADX less than 1% points out even a strong 'investment pressure' which can lead to a violent movement in one or other direction.

• Because for the ADX (14) are used in general more than fourteen trading days in dates, can react the RAVI faster and displays crossings between trend and rank markets faster and better.
  

Standard setting: 7 days and 65 days