RVI Inertia Signals for Long-Term Trend Following

Summary

This strategy uses a smoothed Relative Volatility Index (RVI), called the inertia indicator, to classify trend direction. It calculates closing-price standard deviation, assigns that volatility to the up or down side according to the close-to-close move, smooths both series, forms an RVI, and applies an exponential moving average. Values above 50 signal a long position; values below 50 signal a short position, with an option to reverse those directions.

The document explains the indicator’s construction and suggests parameter tuning, combining it with other signals, adjusting position size, and adding stops. It describes the approach as a low-complexity way to follow trends, but supplies no performance results. Its main caveat is lag: the smoothed signal can respond late to reversals, and its behavior depends on the chosen period and smoothing settings. The published backtest settings concern BTC perpetual futures over a short date range, which does not establish results across other markets or conditions.

Key ideas

• The inertia indicator smooths an RVI derived from volatility on up and down closes.
• A reading above 50 produces a long signal, while a reading below 50 produces a short signal.
• Smoothing can delay entries and exits around trend reversals.
• The document recommends parameter testing, additional filters, position sizing, and stop losses.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.