HMA - Hull's Moving Average

Technical Analysis - Indicators of Technical Analysis
HMA - Hull’s Moving Average was created by Allan Hull. Hull’s moving average serves mainly to idenfity the prevailing market trend. Unlike an EMA the Hull's Moving Average curve is considerably smoother and follows the price graph much closer. It is used especially for middle-term and long-term trading.


HMA construction is quite easy:

-    Define the HMA time period first, e.g. 16 days.
-    The formula looks like follows:


HMA = WMA[floor(√(n))] of (2 * WMA[floor(n/2)] - WMA[n])

 


That is:

  1. Calculate WMA – Weighted Moving Average for half of the period selected (WMA 8 in this case) and multiple the result by 2.
  2. Calculate WMA of the basic period (WMA 16) and subract if from the first step done (2 * WMA8)
  3. Calculate the square root of the basic time period, i.e. √16 = 4.
  4. Calculate WMA 4 from the value we got in step 2.


For further information about WMA – Weighted Moving Average see this.

 


Note: If we choose a basic time period, which square root or dividing by number 2 isn't an integral number, e.g 2.5, then round it down until you get a whole number. For example, if we want to get HMA with the time period of 5 days, then:

 

  • in the first step we would calculate WMA2 (because 5/2 = 2.5)
  • in the fourth step we calculate WMA2 (because √5 = 2.24)



Allan Hull does not recommend to base the trading on two HMA crossings. He uses first HMA to enter his trades and another one to exit them. If you wanna see the author's article along with the HMA in a chart, click here.

 

How to use HMA:

Hull's Moving Average is used in a similar way as the ADX is, i.e. to identify the prevailing market trend. If the HMA curve is rising, then the prevailing trend is rising as well. It is better to enter some Long trades then. Should the HMA curve be falling the prevailing trend would be Downtrend so it would be better to go Short.

If you are interested in a deeper study of this technical indicator and prefer ready to serve solutions, this may be of  interest to you. There you can find all the available indicators in Excel file for download.
 

Forex Trading

Advertising