The Hull Moving Average (HMA) was developed by Alan Hull in 2005 to solve the biggest problem with traditional moving averages: lag. By using weighted moving averages and a square root formula, the HMA responds to price changes faster while maintaining smoothness.
What is the Hull Moving Average?
The HMA is a type of moving average that dramatically reduces the lag associated with simple and exponential moving averages. It achieves this through a clever calculation that emphasizes recent price action while still providing a smooth line.
The key innovation: Alan Hull discovered that by taking the difference between a short-period WMA and a long-period WMA, then smoothing the result with another WMA, you get a moving average that hugs price closely but stays smooth enough to identify trends.
How HMA is Calculated
The HMA uses a three-step process that involves weighted moving averages (WMA):
HMA Calculation (for period n)
Step 1: Calculate WMA with period n/2 and multiply by 2
Step 2: Calculate WMA with period n
Step 3: Subtract Step 2 from Step 1 to get the Raw HMA
Step 4: Calculate WMA of Raw HMA with period = square root of n
Formula: HMA = WMA(2 x WMA(n/2) - WMA(n), sqrt(n))
Why HMA is Faster Than Other Moving Averages
The HMA's speed comes from its unique calculation:
- Double weighting: The half-period WMA is multiplied by 2, heavily emphasizing recent prices
- Subtraction method: Subtracting the full-period WMA removes lag
- Square root smoothing: The final WMA uses fewer periods (sqrt of n), keeping the result responsive
Comparing HMA to Other Moving Averages
HMA vs SMA (Simple Moving Average)
- HMA is significantly faster with less lag
- SMA is smoother but slower to react
- HMA can turn before price peaks/troughs; SMA turns after
HMA vs EMA (Exponential Moving Average)
- HMA is faster than EMA of the same period
- EMA is more common and available on all platforms
- HMA provides cleaner directional signals
Speed Comparison Example
Using 20-period moving averages on a stock that just bottomed:
- HMA: Turns up within 2-3 bars of the bottom
- EMA: Turns up 5-7 bars after the bottom
- SMA: Turns up 8-10 bars after the bottom
This faster response means earlier entries and better timing.
HMA Trading Signals
Directional Change
- HMA turns up: Bullish signal, potential long entry
- HMA turns down: Bearish signal, potential short entry or exit longs
Price Crossovers
- Price crosses above HMA: Bullish confirmation
- Price crosses below HMA: Bearish confirmation
Color Changes
Many charting platforms show HMA in different colors based on direction:
- Green or blue when HMA is rising
- Red when HMA is falling
HMA Trading Strategies
Strategy 1: Direction Change Strategy
- Enter long when HMA changes from falling to rising
- Enter short when HMA changes from rising to falling
- Use a stop loss based on recent swing high/low
- Exit on the next direction change
Strategy 2: Dual HMA Crossover
- Add a faster HMA (9 period) and slower HMA (21 period)
- Buy when fast HMA crosses above slow HMA
- Sell when fast HMA crosses below slow HMA
- This reduces false signals from single HMA
Strategy 3: HMA with Support/Resistance
- Identify key support and resistance levels
- Wait for HMA to turn up near support for long entries
- Wait for HMA to turn down near resistance for short entries
- This combines trend timing with key price levels
Strategy 4: HMA Trend Filter
- Use a longer HMA (50 period) to identify the trend
- Only take long trades when price is above the 50 HMA
- Only take short trades when price is below the 50 HMA
- Use a shorter HMA (9-14 period) for entry timing
Optimal HMA Settings
Short-Term Trading (5-15 min charts)
- HMA period: 9-14
- Very responsive to price changes
- More signals, some may be false
Swing Trading (Daily charts)
- HMA period: 20-30
- Good balance of speed and reliability
- Captures medium-term trends well
Position Trading (Weekly charts)
- HMA period: 14-21
- Identifies longer-term trend changes
- Fewer but more significant signals
Advantages of HMA
- Minimal lag: Responds faster than SMA and EMA
- Smooth line: Despite speed, remains smooth for trend identification
- Clear signals: Direction changes are easy to spot
- Versatile: Works on any timeframe and market
Limitations of HMA
- Can be too fast: May generate whipsaws in choppy markets
- Overshoots: Sometimes crosses price before the actual turn
- Less available: Not on all charting platforms
- Complexity: Harder to calculate manually than SMA or EMA
Tips for Using HMA Effectively
1. Confirm with Price Action
HMA direction changes are more reliable when confirmed by candlestick patterns or breakouts of key levels.
2. Use in Trending Markets
Like all trend indicators, HMA works best when the market is trending. In ranging markets, consider using other indicators or tightening your criteria.
3. Combine with Momentum
Adding an oscillator like RSI or MACD can help confirm HMA signals and filter out false moves.
Track Your Moving Average Trades
Pro Trader Dashboard helps you analyze which moving average setups work best for your trading. Track your HMA trades and see real performance metrics.
Summary
The Hull Moving Average offers the best of both worlds: the speed of short-term averages and the smoothness of long-term averages. Its innovative calculation makes it an excellent choice for traders who want to reduce lag without sacrificing signal quality. Use it alongside other analysis methods for best results.
Want to learn about more advanced moving averages? Check out our DEMA and TEMA Guide or explore the Adaptive Moving Average (KAMA).