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HMA – Hull Moving Average is an indicator created by Allan Hull . HMA calculates the average price and draws results as a line on a chart. The biggest advantage of HMA is minimal lag comparing to SMA ( Smooth Moving Average ) or WMA ( Weighted Moving Average )
Moving averages are always popular among traders. Investors trust them because they can be very accurate trend indicators.
HMA strategy do’s and don’ts.
HMA used properly can be very helpful as a part of the trading strategy. I’m going to say it again PART OF TRADING STRATEGY. No indicator alone should be used as a Buy/Sell signal. To make it clear, let’s see this in two examples.
In the first case, we take AUDUSD on the 1-hour chart with an HMA period set to 84.
A quick look on numbers and price flow would make you think – wow this is it, I want that indicator. Five wins in a row with a total profit of over 3500 points. Who wouldn’t want that kind of trading results? All that with just one indicator-HMA. Before you jump into trading, please have a look at another case.
Here we have CADJPY on a 5-minutes chart with an HMA period set to 84.
As a TP, we close a position once we hit 100 points. Now trading doesn’t look so great and easy. After a first few wins, we will experience a series of loses which will shrink our account balance.
Another warning regarding using Hull Moving Average is applying a cross-over strategy. As a trader, you have to remember that HMA eliminates lag, and lag is what you need when it comes to using Moving Averages cross-over technique. What works for SMA it fails with HMA.
If you set the HMA period to 21 and apply it to a trend-based strategy, then this little indicator is a great helper. Combined with support and resistance lines, it will show you if the price is in uptrend or downtrend. Paired with a stochastic oscillator will give you better signals for opening Short or Long positions.
If You are thinking of using the HMA indicator, please give a go to our version of that classic MT4 trading tool. Our Hull Moving Average contains:
- · Dynamically changing colour ( GREEN line – uptrend; RED line downtrend)
- · 3 types of notifications – on-screen, email and mobile
- · Ability to set the desired period