The Ease of Movement binary options’ indicator is the indicator of the technical analysis that shows the correlation between the market volumes and the market price rate of change. In other words, this auxiliary tool shows the volume which is needed for the market prices to change. The Ease of Movement binary options’ indicator was developed by Richard Arms, Jr., also known for the development of the Arms Index indicator.
What is Ease of Movement indicator?
This binary options’ indicator considers the correlation of the middle point movement to the volumes’ showings. The middle point is the average price for a day, taking into account the maximum and the minimum of the trading session. The middle point can be also calculated for all previous trading sessions. In order to make the binary options’ indicator graphically informative, the moving average, which smoothes the value of the auxiliary tool, is used. Its period equals to 14 candles.
The moving average used during the Ease of Movement binary options’ indicator’s construction can act as some sort of the signal line and has a number of analogues in other binary options’ indicators, for example, in the MACD. You can buy binary options in those cases when the indicator’s line crosses the 9-day moving average. However, the majority of traders wait until the time when the indicator’s line crosses the zero level. In order to eliminate the false signals, which can be sent by this indicator, traders use a smoothing.
If the Ease of Movement binary options’ indicator shows a growth, it means that the market ascending trend passes with small values, and its reversal is possible in the nearest time. Therefore, a trader can buy the Put option in the long view and expect that the main market trend will reverse. If the indicator’s line declines, then the price lowering with small volumes occurs in the market. It suggests that even small volumes can trigger the change of the current situation in a market. In this case, a trader is recommended to buy the Call option with a view to the reversal of the current descending trend. If the line of the Ease of Movement binary options’ indicator is located near the zero level, it shows that the fairly strong volumes are needed for the formation of a trend in a market. Without the strong volumes, you won’t be able to get a market moving. The appearance of such signal warns a trader that it is better to temporarily refrain from the purchase of binary options.
The same can be said about the situations when the indicator’s line appears either too high (price growth in a market takes course with small volumes too) or too low (the descending market movement takes course with small volumes). In both cases, the reversal of the current trend is possible in the nearest time.
Trading signals of Ease of Movement indicator
As for the trading signals, a trader is recommended to buy the Call option when the indicator’s line crosses the neutral line from down to up and strives to the extreme values. Buying the Put binary option is recommended in the situations when the line of the Ease of Movement binary options’ indicator crosses the zero level from up to down and strives to the minimum values.
The usage this indicator together with others is recommended in order to receive as many accurate signals as possible and to avoid the false signals. One of the peculiarities of this binary options’ indicator is that the larger the volume is and the narrower the price range is, the lesser the ease of the price movement on a chart is.