Ease of Movement Indicator

Ease of Movement or EMV is a momentum indicator which shows the relationship between price change and trading volume. Many traders trading stocks, futures and currencies use this indicator to generate buy and sell signals. Ease of Movement indicator was developed by Richard W Arms Jr. and is closely related to Equivolume charts. The formula for calculating EMV is

Ease of Movement = Mid Point Move / Box Ratio

Where
Mid-point move = Today’s mid point (high + low/2) – Yesterday’s midpoint
Box Ratio = Volume / (high - low)
The daily values of Ease of Movement are then smoothed by using a moving average (often 10 or 14 day).

Ease of the movement indicator shows both negative and positive values.

1. High negative values show downtrends with low trading volume. i.e. low volume is required to make a movement.
2. High positive values show uptrends with low trading volume. Again low volume is required to make a movement.
3. Low values (around zero) show corresponding trends with high trading volume indicating accumulation or distribution. Here high volume is required to make a movement.
4. Zero value is generated when there is very high trading volume for very small price changes.

Most systems generate buying signals when ease of the movement crosses above zero from below and generate sell signals when it crosses below zero from above. With most other technicals, it is advised to use other indicators and tools to confirm price changes and buy/sell signals.

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