Hull Moving Average (HMA)
Last updated
Last updated
The Hull Moving Average (HMA) is a type of moving average developed by Alan Hull with the goal of reducing lag while maintaining smoothness in the curve. Traditional moving averages, like the Simple Moving Average (SMA) or Exponential Moving Average (EMA), often suffer from a trade-off between responsiveness and smoothness. The HMA aims to solve this by offering a faster and more accurate indicator of price trends without the noise.
It’s particularly popular among traders who want to spot trend changes earlier and avoid false signals caused by market noise.
The Hull Moving Average is calculated using a combination of weighted moving averages (WMAs) and a mathematical adjustment to reduce lag. Here’s the general formula:
WMA of period n / 2
WMA of period n
Subtract step 2 from twice step 1
Take the square root of period n and apply a WMA to the result
This technique smooths out price fluctuations while enhancing responsiveness, making the HMA an advanced yet intuitive tool for identifying trends.
Reading the Hull Moving Average is straightforward:
Rising HMA line suggests a bullish trend.
Falling HMA line indicates a bearish trend.
When the price crosses above the HMA, it could signal a buy opportunity.
When the price drops below the HMA, it may point to a sell opportunity.
Because of its low lag, the HMA reacts more quickly to price changes compared to traditional moving averages, allowing traders to make timelier decisions.
There is no universal setting that fits all strategies, but some common periods include:
9-period HMA for short-term trading and scalping
21-period HMA for medium-term trend spotting
55-period HMA for longer-term trend following
The period you choose should align with your trading timeframe and risk tolerance. Shorter HMAs will be more responsive but might produce more noise, while longer ones offer stability at the cost of delay.
Here are some ways to incorporate the Hull Moving Average into your trading strategy:
Use the HMA to confirm the direction of the trend. Combine it with other indicators like RSI or MACD to validate entries and exits.
Apply two Hull MAs of different periods (e.g., 9 and 21). A bullish signal occurs when the shorter HMA crosses above the longer one, and vice versa for bearish signals.
The HMA can act as a dynamic level of support in uptrends or resistance in downtrends. Watch how the price interacts with the HMA to assess trend strength.
Set your entries when price crosses above the HMA in an uptrend and exits when it crosses below in a downtrend.
Using HMA in Isolation: While the HMA is powerful, relying on it alone can lead to false signals. Always combine it with other indicators or chart patterns.
Improper Timeframe: Using the same HMA settings across all timeframes may not yield effective results. Adjust the settings based on whether you’re scalping, day trading, or swing trading.
Overfitting: Don’t over-optimize your HMA period just to fit historical data. This can lead to poor performance in live markets.
Ignoring Market Conditions: HMA works well in trending markets but may give misleading signals in sideways or choppy conditions.
The Hull Moving Average is a sophisticated tool that improves on traditional moving averages by minimizing lag and improving responsiveness. Whether you're a short-term scalper or a long-term trend follower, the HMA offers a flexible and powerful way to interpret market direction.
By integrating the HMA into a well-rounded strategy and combining it with other indicators or market structure analysis, you can significantly enhance your ability to time entries and exits effectively.
As always, test your approach on historical data or in a simulated environment before applying it with real capital.
