Catwalk Easy: EOM Indicator Market Dance Class

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Ease of Movement (EOM) is an indicator that sounds like a cat gracefully leaping in the market, but it is actually a technical indicator invented by the great Richard Arms based on trading volume. It is like a conductor on the market stage, using its unique rhythm to tell us whether the market is dancing effortlessly or struggling to move forward.

First, we need to understand that EOM is essentially an oscillator, much like the waves of market sentiment, fluctuating between positive and negative. When EOM is positive, it's like a cat effortlessly jumping on a roof, indicating that market prices are more likely to rise. On the other hand, when EOM is negative, it's like a cat falling into a pool, indicating that market prices are more likely to fall.

Now, let's untangle the seemingly complex but actually fascinating formula of EOM. Imagine yourself as a cat trying to jump from one roof to another. The "distance moved" represents the distance of your jump, while the "box ratio" represents the difficulty of your jump (perhaps due to strong wind or carrying a bunch of fish treats). Then, through some magical feline mathematical calculations, you can determine the "ease of movement" for each jump! The 14-period EOM is the average "ease of movement" after you have made 14 consecutive jumps.

To calculate EOM, four necessary steps are required. Here, we will use the example of calculating a 14-period EOM:

Calculate the distance moved. ((Current High + Current Low)/2 - (Previous Period High + Previous Period Low)/2) = Distance Moved

Calculate the Box Ratio, which uses volume and the high-low range to generate the denominator in the EOM calculation. ((Current Volume/100 million) / (Current High - Current Low))

Calculate the 1-period EOM. Distance Moved / Box Ratio = 1-period EOM

Calculate the 14-period EOM. 14-period Simple Moving Average of 1-period EOM = 14-period EOM

When using EOM, you need to be like a smart cat, observing whether these jumps are happening under a clear blue sky or in a storm. Wide ranges with low volume mean that the market is strolling leisurely in the sunshine, while narrow ranges with high volume indicate that the market is struggling to move forward in a storm. Remember the following two points:

Wide ranges with low volume indicate that the market is relatively easy to navigate.

Narrow ranges with high volume indicate that the market is relatively difficult to navigate.

EOM can also be used in conjunction with other indicators, just like a cat playing with its buddies. Although it is not the main character, it is a good supporting role that can help you better understand the dynamics of the market.

In short, the EOM indicator is like a clever cat that helps us grasp the rhythm of the market by observing its ease. When using EOM, remember to be agile like a cat and not rely on it completely. Instead, cooperate with other indicators to navigate with ease in this complex market world. This cat will briefly present the code for EOM:

This code is a TradingView Pine Script script used to calculate the Ease of Movement (EOM) indicator and plot it on the chart.

First, //@version=5 indicates that the script uses the syntax of TradingView version 5.

The next line of code defines the title and short title of the indicator and sets the format to volume. title="Ease of Movement" is the full name of the indicator, and shorttitle="EOM" is its abbreviation.

Then, there is the line of code format=format.volume, timeframe="", timeframe_gaps=true. It sets where the indicator is displayed on the timeframe, which is set to the current timeframe by default, and allows for the existence of timeframe gaps.

Next is the line var cumVol = 0.. It declares and initializes a variable cumVol with an initial value of 0.0.

Immediately following is the line cumVol += nz(volume). It adds the volume of the current bar (candlestick) to the cumVol variable. Note that the nz() function is used here to handle the accumulation operation in case of possible NaN (empty value) situations.

Then comes the conditional statement: if barstate.islast and cumVol == 0. If the current bar is the last bar and the cumulative volume is equal to zero, the following operations are executed:

The error message "No volume is provided by the data vendor." is thrown using the runtime.error() function.

After that, two input parameters are defined: length = input.int(14, minval=1) and div = input.int(10000, title="Divisor", minval=1). The first parameter is the length of the EOM indicator, with a default value of 14 and a minimum value of 1. The second parameter is the divisor, with a default value of 10000, and it is displayed with the title "Divisor" in the input box.

Next, the EOM value is calculated using the following formula:

Here, ta.sma() is a simple moving average function provided by TradingView, used to calculate the moving average of the specified data series. ta.change(hl2) calculates the high-low price difference of the current bar (candlestick), (high - low) calculates the price range of the current bar (candlestick), and volume is the volume of the current bar (candlestick).

The last line of code uses the plot() function to plot the calculated EOM value on the chart.