Relative Volatility Index (RVI) Indicator Explained

Donald Dorsey's Relative Volatility Index (RVI) is RSI with one substitution: instead of price changes, it feeds standard deviation into the up/down averaging — measuring whether volatility is concentrating on up bars or down bars. Volatility with a direction.

How It Works

• Standard deviation is attributed to up or down bars, RSI-style, over the window.
• Above 50: volatility favors the upside; below 50: the downside.
• Designed as a confirmer, not a standalone signal.

How to Trade It

Dorsey's rule: take other systems' buy signals only when RVI > 50 (sell signals only below). It's a one-line confirmation gate that filters signals where price direction and volatility direction disagree — a surprisingly common failure mode.

Building It in Setup.Cash

Add Relative Volatility Index (RVI) in the strategy builder — the length input controls its sensitivity — and use its value in any entry, exit, or filter condition. You can also combine it with other tools in the Indicators Lab or via the AI indicator generator. The Inertia indicator is RVI smoothed into a regime line. For the full category overview, see the volatility & statistics library guide.

Volatility indicators qualify trades rather than generate them — backtest your system with and without this filter and compare the drawdowns.