What Is the Ease of Movement Indicator?

Richard Arms' Ease of Movement (EOM or EMV) indicator is a technical study that attempts to quantify a mix of momentum and volume information into one value. The intent is to use this value to discern whether prices are able to rise, or fall, with little resi🎐stance in the directional movemenᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚt.

Theoretically, if prices move easily, they will💎 continue to do so for a period of time that can be ℱtraded effectively.

Understanding the Ease of Movement Indicator

The Ease of Movement indicator, also known as the Ease of Movement Value (EMV) indicator, is an 澳洲幸运5官方开奖结果体彩网:oscillator that was developed by Richard W. Arms, Jr. to help traders identify the "ease" of price movement. Since it looks at both price 澳洲幸运5官方开奖结果体彩网:volatility and volume, many traders find 🍸it useful when assessing the strength of a trend.

The EMV indicator involves several different calculations, including a 澳洲幸运5官方开奖结果体彩网:simple moving average:

$\begin{aligned} &\text{Distance Moved} = \left(\frac{\text{High}\ +\ \text{Low}}{2}\ -\ \frac{\text{PH}\ +\ \text{PL}}{2}\right)\\ &\text{Box Ratio} = \frac{ \left(\frac{\text{Volume}}{\text{Scale}}\right)}{\text{High}\ -\ \text{Low}}\\ &1\text{-Period EMV} = \frac{ \left( \frac{\text{High}\ +\ \text{Low}}{2}\ -\ \frac{\text{PH}\ +\ \text{PL}}{2}\right)} {\left( \frac{ \frac{\text{Volume}}{\text{Scale}}}{\text{High}\ -\ \text{Low}}\right)} \end{aligned}$​Distance Moved=(2High + Low​ − 2PH + PL​)Box Ratio=High − Low(ScaleVolume​)​1-Period EMV=(High − LowScaleVolume​​)(2High + Low​ − 2PH + PL​)​​

Scale equals 1,000 to 1,000,000,000 depending on the average daily volume of the stock. The more heavily traded the stock, the higher the scale𓂃 should be to keep the indicator value in single or double digits.

$\begin{aligned} & \text{14-Period Ease of Movement} = 14\text{-Period Simple}\\ &\text{Moving Average of } 1\text{-Period EMV}\\ &\textbf{where}:\\ &\text{PH}=\text{Prior High}\\ &\text{PL}=\text{Prior Low} \end{aligned}$​14-Period Ease of Movement=14-Period SimpleMoving Average of 1-Period EMVwhere:PH=Prior HighPL=Prior Low​

When the indicator creates output values above zero and rising, this suggests tha🐻t the price is increasing on low volume, while falling negative💦 values suggest that the price is dropping on low volume.

Special Considerations

Some analysts prefer to add a 澳洲幸运5官方开奖结果体彩网:moving average to the EMV line and use it as a 澳洲幸运5官方开奖结果体彩网:trigger line to generate trading signals. Traders may also look for divergences and convergences between the Ease of Movement and price as a signal of upcoming reversals. Because the calculations of the EMV result in a line very similar to a momentum or 澳洲幸运5官方开奖结果体彩网:rate-of-change indicator, the EMV can be considered similar to a volume-weighted momentum line. Comparing the EMV and the Momentum indicator may provide useful informat𒊎ion about the influence of volume on price.

Most traders use EMV in conjunction with other forms of 澳洲幸运5官方开奖结果体彩网:technical analysis, including both technical indicators and chart patterns, to improve their chances of success. For example, a trader may notice a bullish reversal chart pattern, see that the Ease of Movement is improving, and buy the stock after it 澳洲幸运5官方开奖结果体彩网:breaks out from a specific price point, rather than relying exclusively on the🎉🦂 indicator.

Ease of Movement Indicator Example

The following chart shows the EMV indicator applied to the SPDR S&P 500 ETF (NYSE ARCA: SPY) in late 2017 and early 2018.

In the above example, the EMV indicator appears below the price chart as an oscillator. A trader may have noticed that the indicator wasn't rising as quickly as the price between January and February, suggesting that the rally could be losing steam, and potentially helping generate a timely 澳洲幸运5官方开奖结果体彩网:sell signal when combined with other forms of technical analy🌸sis.

The peaks and valleys over the subsequent periods also show when the stock began to regain some of its momentum, which may be helpful when trading in 澳洲幸运5官方开奖结果体彩网:choppy markets.