The Hull moving average indicator or HMA indicator was developed by Alan Hull with the objective of bringing down lag, getting rid of noise, and at the same time increasing the responsiveness. Using the indicator, traders can make informed decisions that alleviate the chances of having positives results after applying the guidance given.
By eliminating noise and the smoothness of the indicator, the moving indicator performs far much better than other averages, such as the simple moving average. ( Click this link to access an economic calendar for your trading strategies )
There is a lot of price lags in the simple moving average compared to the exponential weight average, which uses more recent data in its compilation. This feature ensures that the indicator is a smooth moving average and a fast one.
Features of The Hull Moving Average
The indicator has the following features:
- The indicator is a smooth moving average
- Uses weighted moving average un calculation
- It is a fast indicator
- Removes noise in the market
Calculation of the Hull Moving Average
The indicator is calculated using the following variances:
- If the period is defined by n, divide n by two and then multiply the product by the moving average
- For the period n, subtract the moving average from the above result
- Find the square root of the n period.
- On the final step, calculate the Hull moving average using the following formula:
HMA=WMA{(WMA*n/2)2} -(WMA*2) *square root of n period
Using the Hull Moving average indicator
The hull indicator is directional, making it very easy and simple to understand and follow through when trading. A rise in HMA suggests that the current trend is also rising, which suggests an upcoming long positions. On the other hand, when falling, it’s a clear suggestion of upcoming short positions.
Trading with The Hull Moving Average Indicator
There are various ways in which, as a trader, you can effectively apply the indicator as describe below:
- Whenever you spot the indicator moving up, arrange to buy
- When the indicator moves down, it’s the appropriate time to sell.
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