Category: Advanced Indicator Set 2
Input parameters
Name
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Setting
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Default
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Input
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Time Series
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Close
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Short period
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Integer >= 2
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7
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Long period
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Integer >= 2
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65
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Calculations
The Range Action Verification Index (RAVI) indicator, developed by Tushar Chande (see reference below), was originally defined as the absolute value of the percentage change between 7-bar and 65-bar simple moving averages:
RAVI = Abs(100*(MovAvg(Input,7)-MovAvg(Input,65))/MovAvg(Input,65))
In the original literature, the Long period is selected to be about a 13-week period of end-of-day data. The Short period is selected to be one-tenth of the Long period.
Discussion
The RAVI indicator can be used to identify whether the market is trending. It attempts to improve on the Average Directional Index (ADX) and is claimed by the author to respond more predictably to price fluctuations than the
ADX. An arbitrary level of 3 percent was used by the author as a threshold to separate sideways markets (RAVI<3%) and trending markets (RAVI>3%). The genetic algorithm optimizer in the NeuroShell Trader Pro or DayTrader Pro can be employed to find appropriate Short and Long periods if RAVI is used in a trading strategy.
Reference
Tushar Chande, “Beyond Technical Analysis”, John Wiley & Sons, ISBN: 0471415677, 2nd edition (2001), pp. 66-70.
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