Ease of Movement Indicator Definition

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 mixture of momentum and volume information into a single value. The intention is to use this value to discern whether prices are capable of rising or falling, with little resistance in the directional movement.

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

Key points to remember

  • The ease of movement indicator shows the relationship between price and volume, and it is often used to gauge the strength of an underlying trend.
  • Ease of movement calculates how easily a price can move up or down, depending on momentum.
  • The calculation subtracts yesterday’s average price from today’s average price and divides the difference by the volume.

Understanding the Ease of Movement Indicator

The Ease of Movement indicator, also known as the Ease of Movement Value (EMV) indicator, is a oscillator which was developed by Richard W. Arms, Jr. to help traders identify the “ease” of price movement. Since he looks at both the price volatility and volume, many traders find it useful in gauging the strength of a trend.

The EMV indicator involves several different calculations, including one simple moving average:

Pinterest\ -\ \frac{\text{PH}\ +\ \text{PL}}Pinterest\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}}Pinterest\ -\ \frac{\text{PH}\ +\ \text{PL}}Pinterest\right)} {\left( \frac{ \frac{\text{Volume}}{\text{Scale}}}{\text{High}\ -\ \text{Low}}\right)} \end{aligned}”>













Distance traveled

=


(



High

+

Down


2








pH

+

PL


2


)














box report

=



(


Volume

Ladder


)



High



Down















1

-EMV Period

=



(



High

+

Down


2








pH

+

PL


2


)



(



Volume

Ladder



High



Down



)





\begin{aligned} &\text{Distance moved} = \left(\frac{\text{High}\ +\ \text{Low}}Pinterest\ -\ \frac{\text{PH}\ +\ \text{PL}}Pinterest\right)\\ &\text{Box Ratio} = \frac{ \left(\frac{\text{Volume}}{\text{Scale}}\right)}{\ text{Top}\ -\ \text{Bottom}}\\ &1\text{-EMV Period} = \frac{ \left( \frac{\text{Top}\ +\ \text{Bottom}}Pinterest \ -\ \frac{\text{PH}\ +\ \text{PL}}Pinterest\right)} {\left( \frac{ \frac{\text{Volume}}{\text{Scale)} }{\text{Top}\ -\ \text{Bottom}}\right)} \end{aligned}


Distance traveled=(2High + Down 2pH + PL)box report=High Down(LadderVolume)1-EMV Period=(High DownLadderVolume)(2High + Down 2pH + PL)

Equal scale from 1,000 to 1,000,000,000 depending on average daily stock volume. The more heavily traded the stock, the higher the scale needs to be to keep the indicator’s value in the single or double digits.













Ease of movement over 14 periods

=

14

-Single Period














Moving average of

1

-EMV Period














where

:














pH

=

High anterior














PL

=

Previous low





\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}


Ease of movement over 14 periods=14-Single PeriodMoving average of 1-EMV Periodwhere:pH=High anteriorPL=Previous low

When the indicator creates production values ​​above zero and rising, it suggests that the price is rising at low volume, while falling negative values ​​suggest that the price is falling at low volume.

Special Considerations

Some analysts prefer to add a moving average to the EMV line and use it as a trigger line to generate trading signals. Traders can also look for divergences and convergences between ease of movement and price as a signal of upcoming reversals. Because the EMV calculations result in a line very similar to a momentum Where rate of change indicator, the EMV can be thought of as similar to a volume-weighted momentum line. The comparison of the EMV and the Momentum indicator can provide useful information on the influence of volume on the price.

Most merchants use EMV in conjunction with other forms of technical analysis, including both technical indicators and chart patterns, to improve their chances of success. For example, a trader may notice an uptrend reversal chart pattern, see the ease of movement improves and buy the stock after bursts from a specific price, rather than relying exclusively on the indicator.

Example of ease of movement indicator

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

Image by Sabrina Jiang © Investopedia 2021


In the example above, the EMV indicator appears below the price chart as an oscillator. A trader may have noticed that the indicator did not rise as fast as the price between January and February, suggesting that the rally could run out of steam and potentially help generate a sell signal when combined with other forms of technical analysis.

Peaks and troughs in subsequent periods also show when the security has started to regain some of its momentum, which can be useful when trading choppy markets.

Who do you read the Ease of Movement Indicator?

The ease of movement indicator fluctuates around a zero line. When the indicator is above the line, in positive territory, prices move forward with relative ease – the higher the value, the greater the “ease”. Similarly, when the indicator is negative, prices fall with relative ease depending on the degree of negative.

What does ease of movement in stocks mean?

Ease of movement refers to the amount of price change that occurs per unit of trading volume. If less volume is able to move prices further, there is greater ease of movement.

How to use the ease of movement indicator?

Traders may want to take positions when the ease of movement is high, as this could suggest buying into an ongoing rally or shorting into an ongoing sell. As with most technical indicators, ease of movement should be used in conjunction with other tools.