This indicator compares price differences, divided by volume, over a specified period in an attempt to determine how easily the price can move. A positive value of the indicator suggests that the average daily price is trending upwards. A negative value suggests it is trending downwards. The Ease of Movement Indicator tends to approach zero when the volumes are high or price differences are very small. This could signal a change of trend.

With this indicator, it is particularly important to test with historical data to determine the optimum period for the market and securities in which you are interested. Since volume is used in calculating this indicator, prudence suggests using secondary indicators that are not volume-based.

For the mathematically minded, this indicator consists of a simple moving average of Arm's Ease of Movement Value, which is calculated by multiplying the differences in average price between the latest pair of periods by the price range for the current period and dividing by the current volume.

You may wish to add some type of Moving Average to this indicator's graph.

References

Arms, R. W. Jr (1983). Volume cycles in the stock market: Market timing through equi-volume charting. Dow Jones-Irwin.