The binary options’ indicator, which is considered in this article, was developed by John Ehlers, one of the most famous analysts of the financial markets. He is one of the specialists who used cyclicality in his work. As for the indicator itself, it measures the strength of the current trend in the market and the possibility that it will continue in future.
Description of Relative vigor index
As we have mentioned earlier, this indicator allows determining the current strength in the market and understanding whether it will continue or not. It is based on the comparison of closing prices and range prices. And the received result is smoothed by the moving average. At the same time, the moving average itself is the reflection of the balance for the certain period, which is chosen by a trader.
Two lines are used in this binary options’ indicator. As in any other oscillator, one of the lines is fast and the other one is slow. And the fast line shows the market’s activity. This line is based on the fact that prices close at the level which is higher than the level of price opening. This line shows the balance in the market for the short period of time.
As for the second line, it is the slow one and shows the balance of the market forces for the longer period of time. These lines cross between each other on the indicator’s chart, and this crossing sends signals, which are typical for any oscillator. It’s important to note that this indicator has no overbought and oversold zones, unlike many other similar oscillators.
When the fast line is crossed by the slow line from down to up, it means that buyers prevail in the market. And if the crossing from up to down occurs, then the sellers are stronger in the market. Generally, as we can see, this indicator is very similar to other oscillators, but it has slight differences.
Trading signals for the Relative Vigor index binary options’ indicator
Signals of this indicator are very similar to signals of other oscillators, except that this indicator doesn’t have its own overbought and oversold zones, and we have mentioned it earlier. Therefore, the Call options are recommended for a purchase when the fast indicator’s line crosses the slow one from down to up.
As for the Put options’ purchase, it is recommended to consider a purchase of these contracts when the fast indicator’s line crosses the slow one from up to down. As we can see, these signals are very simple too, and are similar to signals of other indicators.
If we consider the continuation trend signals, the growing values of the indicator can be referred to this category. It means that the ascending trend continues to gain momentum, so a trader is recommended to buy the Call contracts. When the indicator’s parameters decline, it confirms that the descending trend continues in the market. Therefore, you can buy the Put options.
In order to receive stronger signals from the Relative Strength Index binary options’ indicator, it has to be used together with other market indicators. For example, it can be used together with the moving averages. In this case, it would be much easier to determine a trend, and a stronger confidence in the purchase of the certain binary option will appear.
One of the major benefits of this indicator is that it allows opening deals in the low markets and close deals in the high markets. Therefore, a trader can use the entire amplitude of the market’s movement to the maximum extent.