Ease of Movement (EOM)
DescriptionThe Ease of Movement indicator is intended to show how volatile the price is (i.e. the ease at which prices are moving). Here the value of the EOM characterizes both the price movement and the volume.
CalculationTo calculate the EOM, a series of case decisions are required. First, some auxiliary definitions are required:
Now the SMA of the volume (VOL) and the range (Ber) are checked to define, by case decision, a relative volume (rel_VOL) and a relative range (rel_Ber):
Now a case decision for the value of "rel_Ber" is used to define a new value, the so-called "box_ratio". With the last case decision on the value of box_ratio, an equation for EOM is then obtained:
where SMA is the Simple Moving Average.
ParametersThe parameter of the SMA. It can assume values between 1 and 500. The standard setting is 10.
InterpretationIf it is "easier" for the price to fall, then the EOM line is below the zero line, whereas if it is "easier" for the price to rise, then the EOM line is in the positive zone. The most common usage of the EOM to generate trading signals. A upwards crossing of the zero line is regarded as a buy signal, and a negative-going crossing as a sell signal.
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