The Hull Moving Average is a technical indicator that was created to reduce the lag of a simple moving average. The indicator was created by Alan Hull in 2015, who was trying to solve the problem of lag in moving averages and create a moving average that gave better signals.
The Hull Moving Average is calculated as follows:
- Calculate a weighted moving average with period n/2 and multiply it by 2,
- Calculate a weighted moving average for period n and subtract from step 1,
- Calculate a weighted moving average with period sqrt(n) using data from step 2.
To add the Hull Moving Average to the trading chart on Interdax, go to the Indicators button and search for ‘Hull Moving Average’:
You can edit the appearance of the line and change the sample period of the Hull Moving Average by clicking on the settings button:
How to Use the Hull Moving Average
A longer sample period can be used for the Hull Moving Average to identify the trend (e.g., 50-day Hull Moving Average), while smaller sample periods can be used to determine entries once the overall trend has been identified (e.g., 8-day Hull Moving Average).
When using a longer-period Hull Moving Average, you can look at the angle or slope of the line to determine both the direction and strength of the trend. If the Hull Moving Average has a positive slope, then the price is suggested to be in an uptrend. The more vertical the angle of the line is, the stronger the uptrend, while if the flatter the line is, then it indicates the trend is weaker.
Therefore, traders should look to go long when the line is trending up or go short when the Hull Moving Average is falling:
You can also use the custom Hull Moving Average indicator on TradingView, which changes colour depending on whether the slope is positive (green) or negative (red) and clearly highlights the current price trend:
When you've identified a trend with the Hull Moving Average, a shorter period HMA can provide entry signals in the same direction as the prevailing trend. A long entry signal, when the prevailing trend is rising, occurs when the HMA turns up and a short entry signal, when the prevailing trend is falling, occurs when the HMA turns down.
The example below compares a 20-day simple moving average with the Hull Moving Average with the same sample period. The yellow line shows the Hull Moving Average while the Simple Moving Average is shown by the light blue line.
One strategy that makes use of moving averages is to buy an asset when the price closes above the moving average after trading below it (or to sell an asset when the price closes below the moving average after trading above it).
The image above shows that the Hull Moving Average (yellow line) is more responsive to price action and provides better entry signals. For example, the price of bitcoin closed below the Hull Moving Average on January 10, 2012 at a price of $38,172, suggesting to go short or to take profit on any open long positions. The price then proceeded to fall as low as $30,441 the next day.
However, using a simple moving average (blue line) with the same period (e.g., 20-day), the price is still above the moving average and no signal was given. It wasn’t until January 20, 2021 that a sell signal was obtained with the Simple moving average, which would have suggested to sell at $35,974, a much lower entry for a short position as compared to the Hull Moving Average.
Similarly, the price moved back above the Hull Moving Average (motivating a buy position) on January 25, 2021, (when the closing price was $32,318) while the same signal was not obtained with the simple moving average until February 2, 2021 (when the price closed above the blue line at $35,576 after trading below it). As this example shows, the Hull Moving Average can identify trend reversals faster than a simple moving average and improve entry points for traders using moving averages.
You can combine the Hull Moving Average with other indicators such as oscillators and volume to provide stronger signals.