Technical Indicators: E
Ease of Movement
The Ease of Movement Indicator was designed to illustrate the relationship between volume and price change. It shows how much volume is required to move prices.
High Ease of Movement values occur when prices are moving upward with light volume. Low values occur when prices are moving downward on light volume. If prices are not moving or if heavy volume is required to move prices then the indicator will read near zero.
A buy signal is produced when it crosses above zero (an indication that prices are more easily moving upward ). A sell signal is produced when the indicator crosses below zero (prices are moving downward more easily).
Developed by Richard Arms, Jr., perhaps better known for the Arms Index (TRIN), the formula is as follows:
[ {(H+L)/2} - {(Hp+Lp)/2} ] / [ V/(H-L) ]
Where:
H = Today's high
L = Today's low
Hp = the previous day's high price
Lp = the previous day's low price
V = current day's volume
Ehlers' Fisher Transform
The Fisher Transform indicator attempts to be a major turning point indicator and is based on John Ehlers' November 2002 Stocks and Commodities Magazine article, "Using The Fisher Transform."
With distinct turning points and a rapid response time, the Fisher Transform uses the assumption that while prices do not have a normal or Gaussian probability density function (that familiar bell-shaped curve), you can create a nearly Gaussian probability density function by normalizing price (or an indicator such as RSI) and applying the Fisher Transform. Use the resulting peak swings to clearly identify price reversals.
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Elder Ray
The Elder Ray index actually consists of two indicators:
"Bull Power" (Daily High - n period moving average) and
"Bear Power" (Daily Low - n period moving average).
Bull Power is used to measure the potential for the price to increase above the moving average, while Bear Power is used to measure the potential for the price to decrease below the moving average. Long positions are taken when the Bear Power is below zero and there is a bullish divergence while Short positions are assumed when the Bull Power is above zero and there is a bearish divergence.
Developed in 1989, the Elder Ray is an extremely accurate and effective means of identifying divergences between bull or bear power and prices and helping time the best trading opportunities.
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