RAVI Indicator Settings, Calculation, Usage

RAVI indicator strategy

RAVI indicator is a forex trading indicator. This is a very simple forex trading indicator. This indicator should be used as a signal confirmation indicator rather than a signal generator indicator. Only in a trending market condition, this RAVI works well. Traders might get lots of fake signals and they can avoid fake signals by avoiding trading in a sideways market. Tushar Chande developed the indicator.

What is RAVI Indicator?

The term RAVI is the abbreviation of the Range Action Verification Index. It helps to identify the ongoing as well as the upcoming market trend. The RAVI indicator deploys two moving averages in its calculation. As long as the histogram continues to rise, the trend might be continuing. Mainly, the indicator reflects the difference between the current price and the previous price.

Formula And Calculation

To begin with, the 65 MA (moving average) is subtracted from the 7 MA, and also this difference is split by the 65 MA (moving average). The quotient is multiplied by 100. So as that a confident outcome is definitely accomplished, the absolute value of this product is created.

If one looks at RAVI settings, one only sees two variable parameters:

  • MA (slow) – slow moving average
  • MA (fast)– fast moving average.

Tushar Chande recommends using the following values: MA (slow) = 65, MA (fast) =7. Just note that the author used these settings for daily timeframes. Now, the question is why precisely these values? The answer is simple: 65 days make up a calendar quarter, besides 7 days make up a week.

How to Set up the RAVI Indicator on Different Charting Platforms?

If traders want to know more about the RAVI indicator, then they can find it in the STUDIES section of Zerodha Kite. They can also use the Kite Mobile App to find out this RAVI indicator. The default Field is close and we can also set this. The default Moving Average Type is Vidya and we can set it also. The Short Cycle is 7 and Long Cycle is 65. We can set Short Cycle and Long Cycle high and low. Check the image below to understand how to attach the RAVI in HDFC Bank share price chart. The OverBought is 3 and OverSold is -3, we also set this high and low. You can attach this indicator on to any charts likes daily, weekly, monthly or intraday.

RAVI Indicator

The next set up I am going to show you is on the Upstox Pro platform. Here also, go through the login process. Then, open the chart and indicator section. Type down the indicator name and click on apply.

RAVI indicator

How to Use Ravi Indicator in Trading?

Rapid Adaptive Variance Indicator (RAVI) is published by Tushar Chande in 1997. Tushar is the author of the popular trading book The New Technical Trader: Boost Your Profit by Plugging into the Latest Indicators (Wiley Finance). Like ADX indicator, the RAVI indicator differentiates between a trending market and a trading market. As a result of this, a rising RAVI shows the start of a trend or a rise in trend intensity, but maybe not the trend way. Although, a falling RAVI shows the finish of a trend or a decrease in trend intensity, but maybe not the trend way itself. This indicator often reacts more quickly and exhibits a far more pronounced curve than the ADX.

Parameters :

The adjustable period size for both MAs could be opted for from 1 to 500. For the most frequent environment of the time scale length, Tushar Chande proposed that the shorter MA be 10 % of the longer MA.

Interpretation :

Ravi indicator consists of histogram bars that are shown in three colors likes green, grey, and red. These different colors have different meanings. Green color indicates bullish market. Grey color bars indicate reversal warnings and the red bars indicate bearish market. It is important that trader should watch for the general direction of the market and trade accordingly. In this chart, every green bar formation on the indicator doesn’t necessarily mean buying signal which is down trending market should be neglected and formations of red bars in an up trending market don’t mean sell. Overall trend of the market cannot be ignored.

Author: Ankita Sarkar

Ankita is a graduate in English language and she has also done her MBA from the Calcutta University. She has a high knack in the stock markets. She is a NISM certified Research Analyst. An experienced stock market content writer Ankita is also trading successfully on her own account.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.