Richard Arms’ Ease of Movement (EOM or EMV) indicator is an analysis of technical nature that aims to put together a combination of volume and momentum data into one number. 1 The purpose of this measure to determine if prices can either rise or fall with minimal resistance in direction of the movement.
If prices are able to fluctuate quickly, they’ll continue to move for a time and is able to be traded efficiently.
Learning what is the Ease of Movement Indicator (EOM)
It is the Ease of Movement (EOM) indicator, often referred to by”the Ease of Movement Value (EMV) indicator can be described as an oscillator created by Richard W. Arms, Jr. to assist traders determine what is the “ease” in price movements. Because it considers the prices fluctuations and volume Many traders use it to determine the intensity of the trend.
The EMV indicator involves a range of calculations, such as the straightforward move average:
Scale ranges from 1,000 to 1,000,000,000, based on the daily average quantity of the shares. The more traded the stock is, more significant the scale will be in order to keep the indicator’s value within single or double figures.
14-Period Easy of Movement = 14-Period SimpleMo Average of 1-Period EMVwhere: PH=Prior HighPL= Low
When an indicator generates output values higher than zero and increasing this indicates it is growing at a low volume, whereas the falling negative value suggests it is falling in low volumes.
Special Beacons
Certain analysts would prefer adding the moving average to the EMV line and utilize it as an signal line to create signals for trading. The traders can also search for convergences and divergences between the Ease of Movement and price to determine the likelihood of Reversals. Because the calculations used to calculate the EMV produce an extremely similar line to the the momentum as well as a rate of change indicator and rate-of-change indicator, the EMV could be regarded as like a volume-weighted momentum line. Comparing the EMV with the Momentum indicator can provide valuable data on the impact of the volume on the price.
The majority of traders utilize EMV together with other types of technical analysis which include indicators for technical analysis as well as chart patterns, in order to increase the chances of success. For instance one might spot the bullish reverse patterns on a chart, observe it as if it’s Ease of Movement is improving and then buy the stock once it comes off from a certain price pointinstead of using the indicator alone.
Examples of Ease of Movement Indicater(EOM)
The chart below shows the EMV indicator that was applied on the SPDR S&P 500 ETF (NYSE ARCA: SPY) in the final quarter of 2017 and in early in 2018.(EOM)
In the example above it is evident that in the above example, the EMV indicator is displayed below the price chart, and is an oscillator. The trader might be aware that the indicator didn’t rise in the same speed as the price did between January and February, indicating that the trend might be slowing down and may be contributing to the creation of an appropriate Sell signal when used in conjunction with other types of analysis using technical indicators.
These peaks and valleys that occur over the following periods also reveal that the stock was beginning to recover some momentum, which could be beneficial when trading in turbulent markets.
Who Can You Read the Easy of Movement Indicator?
The Ease of Movement indicator fluctuates between an equilateral line. If the indicator is above the line, which is in positive zone, prices are rising at a moderate pace – the higher the number, the greater”ease” “ease”. When it is negative on the chart, they are falling in a manner that is largely dependent on the magnitude of the negative.
What does ease of movement mean in stocks?
Ease of movement is the amount of price change that occurs per unit of volume traded. If the volume is smaller, it can move prices further it is easier of movement.
What is the best way to use be the Ease of Movement(EOM) Indicator Be Utilized?
Traders may be tempted to take positions when the speed of movement is very high, since it could indicate buying into an current rally or shorting into an ongoing selloff. Like most indicators of technical analysis that are easy to move should be considered alongside other indicators.
