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What is Ease of Movement?

What is Ease of Movement?

The Ease of Movement (EMV) indicator measures the degree to which prices can be moved by a lower volume of trading. It was developed by Richard Arms, inventor of the Arms Index, which also attempts to quantify the relationship between price movements and volume. High positive values indicate a present tendency for prices to increase on low volume, and larger negative values indicate that prices are slipping lower but with relatively low trade volume.

Arms also developed the Equivolume Box chart, which makes identifying strong breakouts easier by widening boxes for days with higher trade volume. The Equivolume Box calculation is partially used in computing the EMV. The Box Ratio indicates how easy prices were to move based on the size of the price range for the day (the denominator), and the volume of trading (the numerator).

The EMV equation uses the difference in the average price from one day or period to the next, divided by the Box Ratio. A higher ease of movement is indicated by a smaller Box Ratio (because there will be a larger range in the denominator compared to the trade volume in the numerator). The smaller the box ratio in the denominator of our EMV ratio, the larger our EMV number.

The EMV can be useful for single days and can offer additional perspective when combined into a simple moving average line for periods such as 14 days in order to generate trade signals

Technical analysis is more popular than ever, but it’s important to remember that there is no single indicator that works well for all securities. Analysts will use the EMV in conjunction with other indicators to confirm trends and increase their odds of success.

Technology allows us to not only see and share trading information more quickly than ever before, but to automate trades using a disciplined technical strategy we define. Artificial intelligence tools from Tickeron can aid traders with trade ideas, help analyze signals to execute advantageous trades, and assist investors with making rational, emotionless, and effective trading decisions.

What is the Arms Index (TRIN)?
What is the Chaikin Oscillator?

Keywords: volume indicators, Richard Arms, Box Ratio, Equivolume Box, Arms Index,