Hull Moving Average For Forex Trading

Last Updated on September 17, 2020 by Alphaex Capital

What Is The Hull Moving Average


There are hundreds of trading indicators out in the trading wilderness that people love and hate.

All can help you get better at forex trading.

Most forex traders stick to common indicators such as Ichimoku, Moving Averages, and RSI’s.

These work in their own accord but there is one indicator that we absolutely love and recommend using (IF you have to use any), and that is the Hull Moving Average (HMA).

What’s so special about this one?

It’s not because it’s unique, in fact, it is just a variation of the simple moving average calculated in a different way.

It’s the way it is weighted towards price, which means it provides a silky smooth moving average that you can work with a lot easier than it’s cousins.

If this is the first time you’ve heard of the HMA, or if you are further down the rabbit hole, then this article is for you.

It’s time to learn more about, what we believe, as one of the best indicators you can use.

After reading the article, you should no longer be searching Google for “Which is the best moving average, simple or exponential”, because the HMA is the answer.

Hull Moving Average

As you can see from the image above, it just looks like a normal moving average, but later on we’ll show you the key differences and why it is vastly superior.

The Hull Moving Average Formula


The hull moving averages formula is really simple, to be honest, but this is the secret sauce that makes it work mathematically, as well as outputting a moving average.

The formula is:
Integer(SquareRoot(Period)) WMA [2 x Integer(Period/2) WMA(Price) – Period WMA(Price)]
(Source: Alan Hull)

Now let’s compare it with it’s more popular cousins formulas:

Simple moving average formula:

Easiest to compute:

The SMA = Close Price x + Close Price x + Close Price x divided by No. of Periods

Example: a 3 day Simple Moving Average would be: 60+62+63/3 = 61. Therefore the indicator would plot 61 as the SMA.

Exponential moving average formula:

The exponential moving average gives more weight to the recent trading days activity, which helps filter out when the price drops significantly for one day but then recovers.

[Close – previous EMA] * (2 / n+1) + previous EMA

Example: 3-period EMA:

[(59 – 61) x (2/4) + 61 = 60]

As you can clearly see that the hma uses a mixture of the two formulas.

This is why it works so well.

So with the formula, you are combining the best of both worlds, which results in a better, more reliable, moving average to place on your trading charts.

After reading the above formulas, if you are still with me, then I have some good news for you…

The software packages compute the above formulas for you instantly and automatically, so you don’t need to worry about the formulas too much.

Hull Moving Average - Billions

The Hull Moving Average Indicator


This indicator is nowhere near as popular as it’s other moving average cousins.

So let’s explain the core differences below:

Hull Moving Average Indicator

In the image above you can clearly see the difference with the indicators following the price and how much/close they are to hugging the price.

You can see that the HMA follows the price much more closely vs. the others.

In terms of closely following the price, it goes in this order:

  1. Hull Moving Average
  2. Exponential Moving Average
  3. Simple Moving Average

Remember that all indicators are lagging due to the nature of the computations.

However, as you can see the hull indicator clearly follows price in a much cleaner fashion than the other two moving averages.

This is what gives it the advantage as there is no “lag”*.

*Well, there is lag because it requires previous data to compute the hull indicator on the screen.

But it’s much more reduced vs. the other moving averages.

How To Use The Hull Moving Average


Now you know its benefits, now its time to learn how to use it

By now you must be realising the extreme similarities between the HMA and its other variations.

You can append the HMA to either:

  • Close price
  • High
  • Low
  • Open

And any other methods you can think of.

You can set the indicator to any time period as well.

If you can use a simple moving average (or any of the other popular versions), then you can 100% use the HMA.

Hull Moving Average Crossover Strategy


This is the beauty of the indicator…

You can do all the strategies that it’s cousin moving averages can do, but more accurately and sooner in most cases.

For example, a very common strategy is the hull moving average crossover strategy because it is super simple and very easy to trade.

The main principle behind the crossover strategy is to follow trends, just like all crossover strategies.

However, with the HMA, you will have found a potential signal earlier.

The core signal for the strategy is this:

Buy

When the faster HMA cross above the slower HMA = buy signal.

Sell

When the faster HMA crosses below the slower HMA = sell signal

That’s it.

A super simple but effective strategy.

What about taking a profit?

You can either:

  • Wait until the HMAs cross back over the opposite way, or;
  • Take profit at the nearest support/resistance level, or;
  • Move your stop loss to follow the market direction.

Here is an example of a hull moving averages crossover strategy buy signal

Hull Moving Average Crossover Strategy - Buy

Here is an example of a hull moving averages crossover strategy sell signal:

Hull Moving Average Crossover Strategy - Sell

As you can see with both of the examples above that the crossover happens frequently in smaller timeframes, and like ALL strategies – it provides false signals.

So it is up to you to use other resources to filter trade signals out.

Here is an example of how the HMA Crossover finds signals earlier and more accurately vs the simple moving average (in white).

Hull Moving Average Crossover Strategy vs SMA - faster signals

Just by throwing out the Simple Moving Average for the HMA can dramatically impact your strategy for the better.

With that being said, this is not the only strategy the HMA can be used for effectively – the world’s your oyster with trading strategies with the HMA.

In fact, we cover some of our best strategies using the HMA in our Forex Trading Strategy Guide.

Hull Moving Average Scalping


So, are hull moving averages good for scalping?

Well, it can be, that is for sure.

Remember it is just a smoother, less-laggy version of the other moving averages – so if you scalp with moving averages, then the HMA can be a game-changer.

Ideally, you can use it to capture moves when the market’s breakout above and below the HMA in order to generate a few pips profit.

Scalping can be difficult to grasp, but there is no harm in loading up a demo account and see how you get on with scalping.

That’s the beauty of trading – some methods are great for you, whilst others are not.

Hull Moving Average Download


There are many resources online where you can find the hull moving averages download and most are completely free.

You can click here for the hull moving average download from MQ5, which is a market place for the indicators itself.

Or you can formulate your own using the hull moving averages formula discussed earlier.

You can download the indicator for free here.

Wrapping It Up


There we have it, the HMA indicator could be the missing piece to your trading jigsaw.

So what do you think?

Now you have read this article you are in a much better position to grab the indicator and give it a go.

This is truly, in our humble opinion, the better of all moving averages you can use for free.

If you are still thirsty for knowledge about trading indicators, then you should check out this article:

The 7 Best Trading Indicators For Day Trading

Until next time:

Hull Moving Average - End - Alphaex Capital

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