The Ease of Movement indicator is a momentum indicator developed by Richard Arm. This is a volume-based indicator that determines the relationship between the rate of change of a currency pair’s price and its volume. As the name implies, this trading indicator is designed to measure the “ease” of price movement. In most cases, if the price is able to move easily, they will continue doing so for a substantial amount of time. As an oscillator, the ease of movement indicator is usually shown as a line that moves up and down. It oscillates between a positive and a negative figure. Indeed, when applied in a chart, the indicator usually looks like the momentum indicator. As with all technical indicators, the EOM is calculated using a combination of various mathematical concepts which we will cover in this article.
What is the Ease of Movement indicator?
The Ease of Movement indicator is an oscillator in the form of a blue curved line that bounces above and below the zero level. A significant positive value above zero indicates that the trend is bullish at a disproportionately low volume. Conversely, a significant negative value below zero indicates that the market is bearish at a disproportionately low volume. This indicator is also used to determine the volume of various assets.
By default, the Ease of Movement indicator is not available in the MT4 terminal, but it can be downloaded for free from any authentic online resource. Installation of the indicator in MT4 is carried out in a standard way.
Ease of Movement Indicator Characteristics
- Type of trading platform – any
- Type of indicator – oscillator
- Trading time – around the clock
- Timeframe – any
- Currency pairs – any
Ease of Movement Indicator Calculation
There are three parts to the EMV formula: distance moved, volume and the high-low range. First, the distance moved is calculated by comparing the current period’s midpoint with the prior period’s midpoint, which is the high plus the low divided by two. Distance moved is positive when the current midpoint is above the prior midpoint and negative when the current midpoint is below the prior midpoint. Distance moved is shown as the numerator in the formula below.
- Distance Moved = ((H + L)/2 – (Prior H + Prior L)/2)
- Box Ratio = ((V/100,000,000)/(H – L))
- 1-Period EMV = ((H + L)/2 – (Prior H + Prior L)/2) / ((V/100,000,000)/(H – L))
- 14-Period Ease of Movement = 14-Period simple moving average of 1-period EMV
How to use the Ease of Momentum Indicator?
When the market is in an uptrend, the Ease of Movement indicator rises above the zero level, indicating that it is quite strong. Conversely, when the market is in a downtrend, the Ease of Movement falls and falls below zero, implying that the seller’s momentum is strong.
Traders can use the Ease of Movement indicator to confirm a breakthrough in the market. That is, they apply the above concept and generate trading signals for the same.
The figure below shows the graph of the USDCHF currency pair on the daily timeframe. With a bullish break in mid-September, the EOM indicator remained above the zero line for two months, indicating a buy signal.
At the end of June, the indicator made a bullish breakdown, which indicates a buy signal.
In August, prices held a significant support area, forming a small lateral range and finally, the price broke through the support, and the EOM indicator – the zero line, gave us a sell signal.
A larger positive value indicates price moving upward on disproportionately low volume. Conversely, a larger negative value indicates price moving downward on disproportionately low volume. Accordingly, ease of movement is used to obtain a sense of how much volume is needed to cause price movement.
Ease of Movement trading strategy
Although the Ease of Movement indicator can be a standalone indicator on which the trading strategy can be built, we could use a 50 simple moving average to try and trade in the direction of the trend.
Ease of Movement buy strategy
- The EOM line should cross the zero line from bottom to top.
- The price should be above the SMA (50).
- Wait for the bullish bar to complete before entry.
- Place the stop-loss around the swing low area.
- Exit the trade if the EOM line crosses below the zero line.
Ease of Movement sell strategy
- The EOM line should cross the zero line from top to bottom.
- The price should be below the SMA (50).
- Wait for the bearish bar to complete before entry.
- Place the stop-loss around the swing high area.
- Exit the trade if the EOM line crosses above the zero line.
Ease of Movement conclusions
The Ease of Movement indicator combines price with volume to create a momentum indicator based on volume. This indicator is associated with price changes, as it tracks the price of underlying assets. For the most part, traders use this indicator, combining it with other indicators to generate trading signals.
Summing up, we can say that a higher positive value of the EOM indicator indicates a strong uptrend and a positive change in price relative to volume. Conversely, a higher negative value demonstrates a strong downtrend due to an adverse change in price relative to volume.
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