A momentum indicator that attempt to determine the strength of the trend by analyzing the relationship between price change and volume.
Overview
The Ease of Movement (EMV) is a momentum indicator that may be useful in determining the strength of a trend. Developed by Richard W. Arms, Jr. (perhaps better known for the Arms Index (TRIN)), the EMV analyzes the relationship between price change and volume.
The Ease of Movement indicator is calculated as follows:
EMV = (((H+L)/2)) – ((pH+pL)/2) / (V/(H+L))
Where:
H = current High price
L = current Low price
pH = previous High price
pL = previous Low price
V = current Volume
The resulting Ease of Movement calculation is often smoothed by an exponential moving average.
The EMV on the EUR/USD daily chart from Dec. 2009 to June 2010
Source: VT Trader
Interpretation
Strong positive EMV values indicate that prices are moving higher on low volume and strong negative EMV values indicate that prices moving lower on low volume. EMV values around zero indicate that higher volume may be necessary to move prices.
Potential trading signals are generated when the Ease of Movement indicator crosses its zero level. Potential buy signals are generated when the EMV crosses above zero from below. Potential sell signals are generated when the EMV crosses below zero from above.
