The Ease of Movement (EOM) indicator is a volume-based oscillator that measures how easily price movement occurs relative to trading volume. When price advances with relatively low volume, it suggests that the market is moving easily, which may indicate underlying trend strength.
If an increase in trading volume is required to produce only limited price movement, the market is considered “heavy.” This article explains the signals generated by the EOM indicator and provides examples of trading strategies based on it.
The article covers the following subjects:
Major Takeaways
- The EOM indicator evaluates price and volume interaction, helping traders identify whether price changes occur with strong or weak volume support.
- When high trading volume is needed to move prices, the market is described as “heavy,” suggesting difficulty in sustaining price movement. Conversely, if prices change with relatively low volume and encounter little resistance, the trend is more likely to continue.
- An “easy” market is more favorable for trading, as prices tend to move with limited resistance.
- When setting up the indicator, it is important to adjust the scaling factor so that EOM values remain within a readable range and are easy to interpret.
- Signals: When the EOM line moves further away from the zero line, price is moving more easily in the current direction, often reaching positive values or negative values. High positive values reflect a strong ease of upward movement, while strong negative values indicate ease of downward movement. At the same time, unusually high or low values may indicate a possible reversal. Divergence is another key signal provided by the indicator.
What Is the Ease of Movement Indicator?
The Ease of Movement indicator is an oscillator that measures how easily price moves over a given period, reflecting overall market activity. Developed by Richard Arms, it measures how easily an asset’s price moves up or down based on the amount of volume required. When price changes occur with relatively low volume, movement is considered “easy,” suggesting that the trend may continue.
The EOM indicator interpretation:
- A price rise on low volume indicates ease of upward price movement and signals further upside.
- A price decline on low volume indicates ease of downward price movement and signals further downside.
- Price changes that require high volume indicate a low level of ease of movement, suggesting the current trend may be short-lived.
The strength of price movement depends on how easily prices change relative to trading volume. The indicator helps distinguish genuine momentum from false signals and identify weakening trends.
The EOM is a type of volume oscillator and movement technical indicator that allows traders to confirm price signals such as key level breakouts and chart patterns. It is placed below the price chart and looks like a curve moving relative to the zero line.
Advantages of the Ease of Movement indicator:
- Unlike most oscillators, it factors in trading volumes.
- It helps to assess the nature of the momentum. If the momentum is “heavy,” the trend is weak. If it is “easy,” the movement will likely continue.
- It can be used to filter false signals.
Disadvantages of the Ease of Movement indicator:
- The indicator is less effective in sideways market conditions.
- It offers limited parameter settings, making it difficult to adapt to specific trading strategies.
- It is a lagging indicator that may produce delayed signals due to its calculation method.
- It may generate misleading signals in markets where volume is distorted by large market participants.
The EOM indicator is a built-in tool on the LiteFinance trading platform. On other platforms, it must be downloaded and installed manually, using the version compatible with the specific platform.
For MT4, a free version of the EOM indicator is available here. To install it, go to File – Open Data Folder and copy the indicator file to the MQL4/Indicators directory.
How the EOM Indicator Is Calculated: Formula
The EOM indicator calculation:
- High, Low – the high and low prices of the current candlestick.
- High (Prev), Low (Prev) – a high and low of the previous candlestick.
- Volume – trading volume for the period.
The value obtained is smoothed according to the period specified in the settings. The default period is 14 candlesticks.
Nuance: The Volume value is calculated as Volume/Scale. Since trading volumes can differ significantly from one asset to another, for example, from 1,000 shares to 100,000 cryptocurrency tokens per period, a scale parameter is used to normalize the indicator values. The scale setting typically ranges from 1,000 to 1,000,000,000, depending on the average trading volume, and helps keep EOM values within a manageable single or double-digit range. The more actively an asset is traded, the higher the scale value should be to maintain clear and readable indicator signals.
Reading EOM Indicator Signals
Most volume indicators are based on the principle that an asset’s price movements are confirmed by rising trading volume, which signals a strong trend. For example, increased buying volume often leads to higher prices.
The Ease of Movement works differently: higher volume can actually slow down a strong trend. So, when volume goes up, buyers and sellers make larger trades, hoping to push the market their way. However, the balance between both sides stays the same, and the price does not get the boost they want.
Indicator signals:
1. An increase in EOM values above the zero line indicates ease of upward price movement and suggests an upward trend. Negative values indicate ease of downward price movement and suggest a bearish trend. When the indicator fluctuates near the zero line, it reflects market indecision.
On the chart above, after a price decline, the EOM moves upward. At this point, the price is trading sideways with a slight bullish bias. The EOM crosses the zero line and continues to move upward, confirming a bullish reversal.
2. The price reverses in the overbought/oversold zone. Each asset has its own trading volumes and its own level of liquidity and volatility, so the deviation of the indicator line from the zero level is important. An unusually large deviation can signal a potential trend, especially when values reach double digits.
The red line represents the EOM zero level, while the black line marks the manually defined overbought zone. Unlike Stochastic or RSI, the EOM indicator has no fixed range, so overbought levels are identified visually using a reduced scale. As the chart above shows, the price often corrects when EOM turns down in the overbought zone. Although the size of these corrections varies, they are frequently sufficient for swing trading strategies.
3. Divergence between the indicator and price movement at a reduced chart scale means that the price is likely to follow the indicator.
Bullish divergence forms when price makes lower lows while the oscillator forms higher lows, whereas bearish divergence forms on higher highs. The signal is generally reliable unless strong fundamental factors come into play. Its main drawback is that it occurs relatively rarely.
Trading Strategies Using the Ease of Movement Indicator
If the indicator is above the zero line and rising, the price is increasing amid low trading volume. If the EOM values are below the zero line and falling, the price is decreasing amid low trading volume. This signal can be used in two cases:
- Breakout confirmation. When price moves sideways, the EOM line usually stays close to the zero level. If price breaks out of the range and the EOM simultaneously goes up or down, this indicates that price is able to move easily in that direction, confirming the validity of the breakout.
- Trend confirmation. Two types of signals may occur: when the indicator crosses the zero line or when it exits the overbought or oversold zone.
The EOM indicator can also generate signals based on divergences.
Trend Confirmation
1. Breakout of a key level.
As an example, let’s examine the hourly EURUSD chart.
The price is trading within a relatively narrow range between support and resistance levels. While the market remains flat, EOM signals should be ignored due to weak market conditions and a lack of directional movement. The indicator becomes relevant only after the price breaks out of this range.
The green candlestick closed above the upper boundary of the sideways channel, while the EOM oscillator rose above its highest levels observed during the flat period. This indicates that selling pressure is not limiting further growth, allowing sustained upward movement. The second large green candlestick provides additional confirmation of the breakout, signaling a potential opportunity to open a long position. Conversely, a close below the lower boundary of the range, confirmed by the EOM, would have signaled a downward breakout.
2. Confirmation of the primary trend.
Several exponential moving averages, which work well on the H1–H4 time frames, are used as a trend indicator: three short-term EMAs and one long-term EMA.
Chart parameters:
- Currency pair – EURUSD.
- Time frame – H4.
- EOM settings – default.
- Moving averages: EMA (8), EMA (12), EMA (24), and EMA (72).
Strategy: Trend indicators provide the primary signal: the short-term EMAs are aligned in one direction and are positioned above or below the long-term EMA. Price remains above the long-term EMA and pulls back toward the short-term moving averages. The setup is confirmed when the EOM indicator crosses the zero line at the moment the moving averages cross.
- Three fast moving averages cross above the slow one (purple line). The EOM crosses the zero line upward, and the price then pulls back to retest the moving averages, providing additional confirmation of the signal.
- The second clear signal to open a long position appears, based on the same setup.
- Late signal. By the time EMA (8) crosses the slow moving average, the EOM indicator has already moved far below the zero line into the oversold zone, suggesting that the signal appears too late.
You can also combine moving averages with the EOM indicator to spot trend reversal points.
Divergence Trading
Divergence itself is a strong signal. Therefore, using additional indicators is optional but still advisable.
After a brief rise, the market reverses. The EOM indicator confirms the weakness of the move: as the decline begins, the oscillator quickly falls into negative territory, showing a lack of buying pressure. However, the farther the EOM moves away from the zero line (red line), the higher the probability of a reversal, as buyers are waiting for more attractive prices.
The price continues to decline, forming lower lows, while the EOM begins to climb, creating a bullish divergence. The oscillator shows that bullish pressure is emerging in the market. Eventually, the price reverses upward.
Optimal Settings and Time Frames
The original version of the EOM indicator offers almost no parameters.
You can only adjust the smoothing period and the scale factor. A period of 14 works well across most time frames, although it may be advisable to fine-tune this value depending on market volatility.
The scale of the EOM indicator is adjusted manually using the Divisor parameter. In the example above, a value of 100,000,000,000 is applied to scale the indicator so that EOM values for the EURUSD pair remain within a readable two-digit range. The Price Precision setting defines the number of decimal places used for price calculations.
Combining EOM with RSI
Another trading strategy is to combine the EOM with other oscillators, such as MACD or RSI. These indicators work similarly: they can signal potential trend reversals in overbought or oversold zones and help identify price direction when their values cross the zero line.
In the first case, both oscillators are positioned far from the midline. The RSI is close to the overbought zone, while the EOM has reached its highest level relative to previous periods. The simultaneous reversal of both oscillators confirms a trend reversal.
In the second case, both oscillators cross above the midline. However, neither the indicators nor the price shows sustained movement. This suggests that oscillators alone are insufficient for identifying a trend, and that trend indicators or chart tools are needed to confirm it.
Conclusion
The EOM indicator is an oscillator that combines price momentum and volume data. It is used in addition to trend indicators. The optimal time frame is M30 or higher. On lower time frames, short-term fluctuations increase the number of false signals.
The indicator is effective for identifying and confirming breakouts of support and resistance levels. One of its drawbacks is its sensitivity to artificial volume spikes, which may be generated by market makers to push the market in a particular direction. However, this effect can be partially reduced by using higher time frames.
The EOM has its drawbacks, but there are no perfect indicators. If you combine different technical analysis tools correctly and test them, you can create a reliable trading system.
Ease of Movement Indicator FAQs
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