Overview :
The Ease of Movement indicator shows the relationship between volume and price change. As with Equivolume charting, this indicator shows how much volume is required to move prices.
The Ease of Movement indicator was developed Richard W. Arms, Jr., the creator of Equivolume.
Interpretation :
High Ease of Movement values occur when prices are moving upward on light volume. Low Ease of Movement values occur when prices are moving downward on light volume. If prices are not moving, or if heavy volume is required to move prices, then the indicator will also be near zero.
The Ease of Movement indicator produces a buy signal when it crosses above zero, indicating that prices are moving upward more easily; a sell signal is given when the indicator crosses below zero, indicating that prices are moving downward more easily.
Example :
The following chart shows Compaq and a 14-day Ease of Movement indicator. A 9-day moving average was plotted on the Ease of Movement indicator.
“Buy” and “sell” arrows were placed on the chart when the moving average crossed zero.
Calculation :
To calculate the Ease of Movement indicator, first calculate the Midpoint Move as shown below.
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Next, calculate the “High-Low” Box Ratio expressed in eighths with the denominator dropped (e.g., 1-1/2 points = 12/8 or just 12).
