Ease of Movement Indicator

Ease of Movement was developed by Richard W Arms and performs a similar function to Equivolume charts. It highlights the relationship between volume and price changes and is particularly useful for assessing the strength of a trend.

The indicator shows:

• high positive values when prices move upward on light volume;
• high negative values when prices move down on light volume;
• low values if price is not moving or if it takes heavy volume to move prices, signaling distribution or accumulation.

Ease of Movement Trading Signals

Signals are normally taken from an exponential moving average plotted on the Ease of Movement indicator. They are more effective in a trending market.

• Go long when Ease of Movement crosses to above zero (from below).
• Go short when Ease of Movement crosses to below zero (from above).

Example

Coca Cola Corporation plotted with   Ease of Movement indicator smoothed by a
  10 day exponential moving average.

1. Go long [L]: Ease of Movement crosses to above zero.
2. Go short [S]: Ease of Movement crosses to below zero.
3. Go long [L]: Ease of Movement crosses to above zero.
4. Go short [S]: Ease of Movement crosses to below zero.
5. Go long [L]: Ease of Movement crosses to above zero.
6. Go short [S]: Note that we are whipsawed more frequently in a ranging market.

Setup

The Ease of Movement default is set at 10 days smoothing by an exponential moving average. To alter the default settings - Edit Indicator Settings.

See Indicator Panel for directions on how to set up an indicator.

Ease of Movement Formula

The steps in calculating Ease of Movement are:

1. Calculate the Mid-point for each day:
              (High + Low) / 2
   
2. Calculate the Mid-point Move for each day:
              Mid-point [today] - Mid-point [yesterday]
   
3. The Box Ratio determines the ratio between height and width of the Equivolume box:
              Volume [in millions] / (High - Low)
   
4. Ease of Movement is then calculated as:
              Mid-point Move / Box Ratio
   
5. Ease of Movement is normally smoothed with a 14 day exponential moving average.