Ease of Movement is a momentum indicator developed by Richard Arm. It is a volume-based indicator which identifies the relationship between the rate of change in a security’s price and its volume. As the name suggests, this indicator is designed to measure the ‘ease’ of the price movement.
A large positive value indicates that the trend is bullish on a disproportionate low volume. Conversely, a significant negative value indicates that the market is bearish on a disproportionate low volume.
In the below figure, we can see that the indicator is represented by a curved line, which bounces above and below the zero-level. A value above the zero-level denotes that the security is accumulated. A value below the zero-level indicates that the security is distributed. This indicator is also used to obtain a sense of how much volume is required to move particular security.
Installing the Ease Of Movement Indicator In MT4 (Step-by-step procedure)
By default, the Ease of Movement indicator is not available on the MT4 Terminal but is available on the internet.
Follow the link below to download this indicator.
After downloading the zip file from the above link, extract the file and go to the MT4 directory/MQL4 as shown in the below image.
Now, click on the ‘Indicators’ folder and paste the extracted file in that folder.
Restart your MT4 Terminal.
Finally, to apply the indicator on the main screen, follow the below steps as shown.
Insert > Indicator > Custom > Ease Of Movement.
Below is an example, where the indicator is applied for the EURJPY currency pair.
Ease Of Movement Indicator – Trading Strategies
Ease Of Movement + Rate Of Change
In this strategy, we pair the EOM indicator with the ROC indicator to identify trading signals.
The ROC is a momentum indicator which measures the strength of the prices by considering its rate of change. This indicator consists of a line which gives bullish and bearish signals by oscillating above and below the zero-line. It also consists of centerline crossovers, which determines the oversold and overbought areas.
The EOM indicator and the ROC indicator are similar to each other, as both of them are momentum indicators. Therefore, they usually give the same trading signals.
The Ease of movement and the ROC indicator oscillates above and below the zero-line. When both the indicators go above the zero-line, it means that the trend is strong and hence, one can look to go long.
From the below chart, we can see that the market was in a downtrend in the beginning, and the indicators were hovering below the zero-level. Later, the market shot up north, and the indicators went above the zero-level as well. This is an indication that the market sentiment is bullish at the moment. Hence, one can take a buy position at this point.
In the below chart of NZDCAD, the currency was coming from a prevailing downtrend. Now, during the pullback, when both the indicators go below the zero line is a sign that the seller’s momentum is gaining strength, and the market is ready to print a brand new lower low.
Both the indicators only helps to identify the trading opportunities, so, while this strategy, it is suggested to exit the positions based on the price action. For example, find the next support/resistance area on your trading timeframe or on the higher timeframe to exit the positions. One can spot a divergence to exit the trade as well. I.e., when you see divergence on any indicator, it is a clue that the indicator is not in sync with the price action and the market is going to reverse soon.
When using this strategy, if you are going with the trend, always put a stop-loss above the recent high. And, if you are going against the trend, then give more space to your stop-loss.
When the market is in an uptrend, the EOM indicator rises and goes above the zero-level, indicating that the trend is pretty strong. Conversely, when the market is in a downtrend, the EOM falls and goes below the zero-level, implying that the seller’s momentum is strong.
Breakout traders use the EOM indicator to confirm a breakout in the market. That is, they apply the above concept and generate trading signals for the same.
The image below represents the EURCHF forex chart on the Daily timeframe. With a bullish breakout in mid-September, the EOM indicator stayed above the zero-line for two months, indicating a buy signal.
At the end of March, the indicator made a bearish breakdown, indicating a sell signal.
Moving forward, in April and May, the prices held at a significant support area and built a small range. And, finally, it broke down the support and the zero line; giving us a sell signal.
The EOM indicator combines the price with volume to create a volume-based momentum indicator. This indicator is tied with the price changes, as it tracks the price of the underlying assets quite closely. For the most part, traders use this indicator by pairing it with other indicators to generate accurate trading signals.
To sum it up, a more positive value indicates a strong uptrend, by a positive change in price relative to the volume. Conversely, the higher negative value shows a strong downtrend, by a negative change in price relative to the volume.
Try using this strategy in your daily trading activities and let us know the results in the comments below. Happy Trading.