Hull Moving Average (HMA)

Name Type Prerequisite Use Cases
Hull Moving Average (HMA) Trend WMA Catching fast reversals and short-term trend changes.

Definition

Developed by Alan Hull, the Hull Moving Average (HMA) makes a moving average more responsive to current price activity while maintaining curve smoothness. It effectively eliminates lag and manages to improve smoothing at the same time.

Mathematical Equation

\[ HMA = WMA(2 \times WMA(\frac{n}{2}) - WMA(n), \sqrt{n}) \]

Special cases

  • Maximum possible value: Unbounded
  • Minimum possible value: 0
  • Behavior: Follows the price closely, designed to be very fast and smooth with minimal lag.

Visualization

HMA

Trading Significance

  1. Trend Reversal: Due to its speed, the turning points of the HMA are often used as entry/exit signals.

  2. Trend Filter: If HMA is rising, trend is up; if falling, trend is down.