The
Ease of Movement Indicator was designed to illustrate the relationship between volume and price change. It shows how much volume is required to move prices.
High Ease of Movement values occur when prices are moving upward with light volume. Low 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 read near zero.
A buy signal is produced when it crosses above zero (an indication that prices are more easily moving upward ). A sell signal is produced when the indicator crosses below zero (prices are moving downward more easily).
Developed by Richard Arms, Jr., perhaps better known for the Arms Index (TRIN), the formula is as follows:
Where:
H = Today's high
L = Today's low
Hp = the previous day's high price
Lp = the previous day's low price
V = current day's volume
[ { (H+L)/2} - { (Hp+Lp)/2} ]
[ V/(H-L) ]
