Trading Binary Options with the Relative Vigor Index
We have taken a look at a lot of technical indicators to help determine what binary options trades we would like to make. By now you are well aware of how important these technical indicators are to making successful trades. Another popular technical indicator that has not been discussed is the Relative Vigor Index. Let’s take a closer look at it.
The Relative Vigor Index, as we said, is a popular technical indicator with many traders. It is an indicator that is a lot like a stochastic indicator; the exception being the closing price is not compared with the low price for a period, but is compared with the opening price instead. Like other indicators, it’s readily available on many charting platforms. Many consider it the type of indicator where you can kind of sit back and wait for things to happen and then place your put and call options. When used correctly it can be a very profitable indicator.
So how does it work? It is a technical indicator that is often used to measure what is sometimes called conviction, which simply put is the likelihood a current price action will keep going. The Relative Vigor Index is a tool to compare an assets price range and the closing prices relevance to it; this is done by taking a smoothed out calculated moving average of the two price values contained in it.
Traders typically look for a Relative Vigor Index to go higher when there is a bullish trend that is gaining momentum. The height of the indicator also determines the relative strength of the current price increase or current price drop. Interpreting it involves using the crossovers between the Relative Vigor Index and the Relative Vigor Index signal line.
You should place a call option when the Relative Vigor Index crosses above the Relative Vigor Index signal line and place a put option when it crosses under the Relative Vigor Index signal line.
The Relative Vigor Index is often viewed as a major indicator. Its advantage is that it is able to predict a change in trend when certain signals are given, specifically when the price of an asset crosses into extreme areas. Using the Relative Vigor Index will sometimes give you confusing signals, but more often than not you will win by using it and that is why it is considered a low risk indicator.
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References and Further Reading:
1. System and method for providing a platform for the trade of financial instruments (I Tzroya – 2014)
2. Intraday Business Model Strategies on Forex Markets: Comparing the Performance of Price Pattern Recognition Methods (N Goumatianos, I Christou, P Lindgren – 2009)
3. Global electronic trading system (A Glodjo, ND Bronson, SE Harrington – 2007)
4. An eigenvalue approach to risk regimes in currency markets (P Lequeux, M Menon – 2010)
5. A Trace and Maximal Eigen Value Analysis of Spot-forward Forex Rates in OECD Countries (J Ibrahim, SIM Salleh, N Abdullah – 2014)
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