The Dynamic Magnetostriction (DM) measurement method as a nondestructive testing method of ferromagnetic materials, measures the DM curve using electromagnetic acoustic transducer (EMAT) to characterize material and predict the mechanical properties. Lorentz forces and magnetostriction forces contribute mainly to the ultrasonic generation. Only the range of low field, in which the magnetostriction force mechanism is predominant can be used to measure the DM curve, but the boundaries of this range are uncertain. The improved DM measurement method based on shear wave Magnetostriction EMAT (M-EMAT) is proposed and the theory of generation of shear waves is derived. For the M-EMAT, only magnetostriction force mechanism contributed to the generation of shear waves. A theoretical model for the optimization of the transducer is developed, the model is in good agreement with the experimental results. The microstructure changes caused by residual strain will affect the magnetostriction coefficient and the DM curve. Therefore, the DM curves of low carbon steel specimens with different levels of residual strains are measured by the optimized transducer to characterize the residual strain. The normalized results demonstrate that the slope of the DM curve obviously changes with the residual strain. This leads to the conclusion that the DM measurement method can be used to characterize the residual strain of the low carbon steels.