Ease of Movement indicator or EMV is a volume-based oscillator that fluctuates above and below the zero line. This indicator is designed to measure the “ease” of price movement. Richard Arms created Equivolume charts to visually display price ranges and volume. It takes Equivolume to the next step by quantifying the price/volume relationship and showing the results as an oscillator. In this indicator, prices are advancing with relative ease when the oscillator is in positive territory and prices are declining with relative ease when the oscillator is in negative territory.
Ease of Movement indicator formula is of three types. The types are: distance moved, volume and the high-low range.
Distance moved is calculated by comparing the current period’s midpoint with the prior period’s midpoint, which is high plus the low divided by two. When the current midpoint is above the prior midpoint then this is positive and when the current midpoint is below the prior midpoint then negative. Other two parts form the Box ratio, which uses volume and the high-low range. Equivolume charts are based on volume and the high-low range as well. The Box ratio is the denominator of Ease of Movement.
Interpretation of Ease of Movement indicator:
The zero line crossing is the deciding factor in the Ease of Movement indicator and to identify bull or bear market. When the indicator is in the positive territory it denotes that the price is advancing with relative ease. And when the indicator is in the negative territory it denotes that the price is declining with relative ease. Check the image below to find how to attach the EMV indicator on a State Bank of India intraday chart.
It is not a standalone indicator. “Distance Moved” is the positive/negative driver. Ease of Movement is positive when the midpoint rises and negative when the midpoint falls. Ease of Movement will rise and fall along with the price of the underlying security. The amount of this rise or fall depends on the Box ratio. A breakout on the price chart or a bullish indicator signal in this indicator.
Ease of Movement can be found in the “studies” section in the Zerodha Kite chart. Users can adjust the settings by changing the numbers in the “parameters” box. This indicator can easily be positioned under the price and by default the color of the indicator is white, but traders can use their own color as per choice.
Ease of Movement combines price direction with volume to create a volume-based momentum oscillator. Because it is closely tied to price changes, Ease of Movement tends to track the price of the underlying security quite closely. For the most part, Ease of Movement is used to confirm signals derived from the price chart or other indicators.
Categories: Technical Indicators