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EMV simple fluctuation indicator introduction

1. Introduction

Simple volatility indicator, designed according to the principle of isometric chart and compressed chart, the purpose is to combine the changes of price and volume into a volatility indicator to reflect the changes in stock prices or indexes. Because changes in stock prices and changes in trading volume can trigger changes in the value of this indicator, EMV is actually a volume-price composite indicator.


2. Calculation formula

A = (Today's highest + Today's lowest) /2, B = (Previous day's highest + Previous day's lowest) /2, C = Today's highest - Today's lowest

EM = (A - B) * C /Today's turnover

EMV = the cumulative sum of EM in 14 days

EMVA = 9-day simple moving average of EMV


3. Application

3.1 A rise in the EMV indicator represents an increase in volume, which is a normal signal when the stock price rises; a fall in the EMV indicator represents a decline in volume, and it is also a normal signal during a fall in the stock price.

3.2 When EMV crosses the 0 axis from bottom to top, it is regarded as a mid-term buy signal; when EMV crosses the 0 axis from top to bottom, it is regarded as a mid-term sell signal;

3.3 The signal has high credibility during the time MAEMV crossing the 0 axis.

3.4 The crossover between EMV and MAEMV is noteworthy.

3.5 The EMV indicator should be used in conjunction with the trend indicator [DMI]. When the ADX in the DMI is lower than the PDI and MDI, or the "indicator failure" signal appears in ADXR, the EMV indicator should be ignored.

3.6 EMV indicator is also applicable to morphological theory.


4. Features

4.1 The EMV indicator reflects the dynamic changes in trading volume during the whole process of price action. Therefore, the indicator is more significant in mid- to long-term price trends. Statistically speaking EMV indicator should be utilized for the long term to get the best efficiency.

4.2 The EMV line remains under the 0 for most of the time. This is because when the stock price falls, the trading volume is generally small, and the EMV is naturally below the 0 axis; when the trading volume increases, the EMV approaches zero again.

4.3 EMV indicator has filtered those short-term bull market that is difficult to maintain for a long term due to overbought scenario, and only gives a buy signal when the market has the ability to enter a stage of steadily rising. If you can buy and sell patiently based on the EMV signal, according to the simulation results, you will get satisfactory results in most cases.

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