Full Review of the Ease Of Movement Indicator for Binary Options Trading
The ease of movement indicator is a technical momentum tool used by traders to measure the relationship between an asset’s movement and volume. Volume is a tool often overlooked by binary options traders and one that should be included in regular market analysis.
The Ease Of Movement Indicator is a technical analysis oscillator that measures the relationship of an assets price changes to trading volume. This is a great thing for binary traders, in theory at least. Volume is an important part of chart analysis and one often overlooked. Volume is often the difference between a losing trade and a winning one. It takes the conviction of the markets for a predicted movement to occur. The more traders involved in any given break-out, support bounce or correction the more likely the market is to perform as expected. When volume is heavy more people are interested in an asset or trading opportunity. When volume is light less people are interested.
How Does The Ease Of Movement Indicator Work
The indicator measures volume versus the rate of an assets price change. It attempts to predict how much volume it will take to move prices in the future. It is also an accumulation/distribution indicator. When the value of the oscillator is above 0 the asset is being accumulated, when it is below 0 it is being sold. A high value on the indicator means that prices moved higher on low volume. A low value means that prices moved lower on low volume. A reading near zero means that it will take a lot of volume to move prices. Signals are generated when the signal line moves over or under zero. When prices move above zero, buy, when they move below zero sell. In addition to these signals a moving average, usually 14 periods, is added producing an oscillator similar to stochastic and MACD(not the histogram). Additional signals and analysis can be gleaned from this addition.
Why This Indicator Does Not Suck
I like this indicator because it utilizes volume, provides clear signals and is perfect for binary options. Volume is important, I have already said that. Sometimes the connection between how volume is affecting current price can be hard to comprehend. An indicator like this one which incorporates volume into the calculation takes a lot of the guess work out of chart analysis. Not to mention that the signals are super easy to spot. When the signal line crosses above zero buy a call, when the signal line crosses below zero buy a put.
Why This Indicator Might Suck
This indicator might suck for a number of reasons. First, it is one indicator alone, not something I recommend very often. Second, it does not take trend into account. Underlying trends and support/resistance lines can negatively impact signals. In order to alleviate these problems two easy steps can be taken. First use multiple time frame analysis to determine what the underlying trends are before trading. Next, draw long term and near term support and resistance lines. Use these lines to help weed out potentially false signals. When price action is close to one of your lines avoid taking signals in that direction. Another reason why this indicator might suck is because it only works on assets with volume.
My Last Words On Ease Of Movement Tool for Binary Options
This is a good indicator for binary options. For one it has a very easy to read signal. There are no caveats or if-this-then-that scenarios to worry about. It is also useful in any time frame so it could be applied to any charts and used to trade options with expiry as short as 60 seconds. It is almost as if this indicator was made for binary options. Of course, you can’t just use it alone. I highly suggest that you utilize some other forms of analysis and trading indicators in order to weed out the whipsaws and false signals that inevitable occur with any indicator. This indicator is approved for all levels, yet I slightly don’t recommend it for new traders.
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