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Anil,
RAVI is an indicator developed by Dr Tushar Chande. He has introduced this
in his book "Beyond Technical Analysis" (John Wiley, New York, 1997).
I'm quoting him to answer your query:
" An indicator that is more directly based on market momentum, and that
responds more predictably than the ADX, is the range action verification
index (RAVI). This strategy, which focuses on identifying ranging markets,
is different from the ADX, which looks at how much of today's price action
is beyond yesterday's price bar.
To define RAVI, we begin by selecting the 13-week simple moving average,
since it represents a quarter of a year. Because we want to use daily data,
we convert the 13-week SMA into the equivalent 65-day SMA of the close. This
is the long moving average. the short moving average is chosen as only 10
percent of the long moving average, which is 6.5 days, or, rounding up, 7
days. Thus, we use 7-day and 65-day simple moving averages. This choice of
lengths is purely arbitrary. Next, RAVI is defined as the absolute value of
the percentage difference between the 7-day SMA (7-SMA) and the 65-day SMA
(65-SMA):
RAVI=Absolute Value(100*(7-SMA - 65-SMA)/65-SMA)
An arbitrary reference level of 3 percent means a market is ranging if the
RAVI is less than 3 percent, and trending strongly if the RAVI is greater
than 3 percent..."
My experience has been that don't just go by his benchmarks. Because I feel
for each security the benchmark levels may be different. So, please
experiment on your own for the markets you would like to apply this
indicator. Even Chande himself notes this in the same text a little later:
"In some markets, such as Eurodollars, this is too high a hurdle. Hence ,
you may want to experiment with a smaller level..."
Hope, this helps you.
Regards,
Trade well.
Rajat
>From: Anil Chugani <achugani@xxxxxxxx>
>To: rajatkbose@xxxxxxxxxxx
>Subject: RAVI
>Date: Sat, 01 May 1999 11:04:12 +0500
>
>Hi Rajat,
>
>Thanks for your most informative post.
>
>I would appreciate if you could explain how the indicator RAVI works. Does
>it work similarly to the ADX or is there some other way to intepret it.
>
>Best wishes for successful trading!
>
>Anil Chugani
>
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