What it means
Technical analysis is the study of price and volume charts to anticipate future moves. Ease of Movement, often shortened to EMV, was developed by Richard Arms to combine two simple ideas: how far the price moved and how much trading it took.
If a price rises sharply on small volume, there was little selling pressure, and the move was easy. The indicator is calculated each period from the high, low and volume.
First it measures the distance the midpoint of the price range has moved since the previous period. Then it divides this by a box ratio, which compares volume with the size of the price range, so that a big move on small volume scores highly.
Because daily readings are noisy, traders usually smooth the line with a moving average, commonly over 14 periods. When the smoothed line is above zero, the price is generally rising with ease, and when it is below zero, the price is falling with ease.
Crossings of the zero line are often treated as signals that the trend may be changing. Used well, the indicator helps to confirm a trend or warn of weakness.
A rally where the line stays near zero suggests that a lot of trading is needed to move the price, which may mean the rise is meeting strong resistance. A rally with a strongly positive line suggests buyers are in control.
Like all technical indicators, it is not a guarantee. It works on past data, can give false signals in choppy markets and varies with the volume scale and time period chosen.
Many traders use it alongside other tools such as trend lines and support levels rather than relying on it alone. For non-specialists, the main idea is worth remembering even without the maths.
Volume is a measure of how much effort the market spends to move a price, and a price that moves a long way on little effort is either strong or fragile. The indicator tries to put a number on that effort, which helps explain why a rally on thin volume can reverse so quickly.
In practice
Real-world examples.
Example
A trader sees a share rise 5% on volume that is half the usual level. The indicator is strongly positive, which suggests few sellers are in the way. He waits for a second day of confirmation before adding to his position.
Example
A portfolio manager notices the line is falling below zero while the price is still near its high. She takes it as a warning that buyers are losing control and reviews her position. She decides to tighten her stop-loss rather than sell everything at once.
Example
An analyst compares the indicator on two similar shares and finds one needs far more volume to move a given distance. She concludes the second is easier to trade. She decides to use it for larger orders so that her own trading does not move the price much.
Formula
Calculation
Distance moved = (High + Low) / 2 - (Prior high + Prior low) / 2
Box ratio = (Volume / Scale) / (High - Low)
Ease of Movement = Distance moved / Box ratio
Worked example: today the high is $52 and the low is $48. Yesterday's high was $50 and the low was $46. Today's volume is 2,000,000 shares, and the scale is 1,000,000.
Today's midpoint = ($52 + $48) / 2 = $50
Yesterday's midpoint = ($50 + $46) / 2 = $48
Distance moved = $50 - $48 = $2
Box ratio = (2,000,000 / 1,000,000) / ($52 - $48) = 2 / 4 = 0.5
Ease of Movement = $2 / 0.5 = 4
The positive value of 4 shows the price rose with relative ease. A trader would compare it with recent readings and its 14-period average.Case study
Seen in the real world.
Falcon Ridge Trading is a fictional small firm that trades shares for its own account. One of its traders, Mr Osei, noticed that a stock he held had risen for six days, and he wondered whether to sell.
He checked the 14-period Ease of Movement line and saw that it had slipped from +3.2 to +0.4 while the price was still climbing. The rise now needed far more volume for each small gain, which suggested that sellers were absorbing the buying. He sold half his position at $84 and kept the rest.
Over the next week the price fell to $78. This illustrative example shows how the indicator can add a warning, though Mr Osei knew that a different outcome was equally possible and kept his remaining position small. He also recorded the trade in his journal so that he could review how well the signal worked over time.
Watch out
Common mistakes.
- Using the raw daily value without smoothing, which produces noisy signals.
- Trading on this indicator alone, when it works best when combined with price trends and other evidence.
- Comparing values across shares without adjusting the volume scale, since the numbers depend on the scale chosen.
Questions
People also ask.
Who invented Ease of Movement?
It was developed by Richard Arms, who also created other volume-based indicators.
What does a reading below zero mean?
It suggests the price is falling with relative ease, so sellers are in control.
Which period is normally used?
Many traders smooth the indicator with a 14-period average, though shorter or longer periods are possible.
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