Hull Moving Average Study
By Samantha Baltodano
TL;DR:
The hull moving average study is a moving average indicator that eliminates the lag effect.
What Is Hull Moving Average?
The Hull Moving Average (HMA) study is a variation of the moving average strategy that addresses the issue of lagging.
Moving averages are a trend-following or lagging indicator because they are based on past prices. The longer the period for the moving average the greater the lag. For example, a 200-day moving average will have a greater lag than a 20-day moving average.
The HMA study eliminates the lagging effect by applying a combination of two weighted moving averages (WMA) with different lengths. The first WMA is equal to the period of HMA. The second WMA is equal to half the period of the HMA.
A WMA prioritizes recent price changes over older price changes. As a result, this smooths the moving average and allows it to more closely follow and identify market trends.
How do you calculate HMA?
The HMA is simple to calculate, but you’ll first need to be familiar with calculating the WMA. You can calculate the HMA by with the following steps:
- Calculate a WMA with a period of n/2 and multiply it by 2
- Calculate a WMA for period n and subtract it from your WMA in step 1
- Calculate a WMA with a period of square root of n using the data from step 2
The formula for HMA is:
HMA = WMA(2*WMA(n/2) - WMA(n)), sqrt(n))
Trading with the HMA Study
You can identify buy and sell triggers with HMA by looking at the turning points.
- Buy when the HMA turns up
- Sell when the HMA turns down
Summary
- The HMA study almost eliminates lag altogether and improves smoothing.
- It provides a faster trade signal than the typical SMA or EMA strategy alone.
- Long term traders today will apply an HMA study to complement other indicators or confirm trading signals.
Hull Moving Average is just one of many study that Archaide automates. For a full list of strategies and studies available click here.
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