Hull Moving Average (HMA)

 

1. PURPOSE

There are many types of moving averages such as Simple Moving Average (SMA and Exponential Moving Average (EMA). Most of the moving averages lags price. This means direction change is very late compare to price move. The Hull Moving Average (HMA) is an extremely fast and smooth moving average. In fact, the HMA almost eliminates lag altogether and manages to improve smoothing at the same time.

2. INPUTS

HMA uses only one parameter, namely Input Period for HMA. Default value is 14.

We can fiddle this value on the basis of trend.

Suppose if you are looking for very short term trend then you can use a value 7 or 11. If you are looking for intermediate trend then you can use a value 14, 21 or 34. For a long term trend you can use 55 or 89.

3.      HOW TO INTERPRET

The indicator is easy to use and gives an accurate reading about an ongoing trend.

Blue line on the chart is HMA. When this line is moving higher then trend is up and when this line is moving lower then trend is down.

When this line changes its direction very rapidly then trend is sideways.

4.      OUTPUT

A longer period HMA may be used to identify trend. If the HMA is rising, the prevailing trend is rising, indicating it may be better to enter long positions. If the HMA is falling, the prevailing trend is also falling, indicating it may be better to enter short positions.

A shorter period HMA may be used for entry signals in the direction of the prevailing trend.

A long entry signal, when the prevailing trend is rising, occurs when the HMA turns up.

A short entry signal, when the prevailing trend is falling, occurs when the HMA turns down.