What is HMA Indicator in Trading?

The Hull Moving Average (HMA) is one of many analytical tools that can be used to figure out the direction of the market’s price trend. It was made by an Australian stock trader named Alan Hull in 2005, which is how it got its name.

What exactly is HMA?

The person who made the tool says this about it:

“The HMA solves a problem that has been around for a long time: how to make the moving average more sensitive to price changes while keeping the curve smooth. In fact, HMA almost completely gets rid of lag while also making anti-aliasing better.

Hull came up with the Moving Average HMA indicator when he was trying to find a way to fix the problem of the moving average being behind. In other words, he wanted a chart showing the average price of a stock or commodity to be as clear and up-to-date as possible while keeping the line showing the average price smooth. To do this, he made the Hull Moving Average indicator, which is a tool he made himself.

The Hull Moving Average and How to Use It

With the Hull moving average, traders can see how prices moved in the past without the chart looking blurry or old.

How to Figure Out the Moving Average

What does the HMA indicator mean in real life? How do you figure it out? There are a few steps, but they are all pretty easy. First, you have to decide how many time periods you want to use. Alan Hull suggests 16, but you can use any number you want. Then you need to set up two weighted moving averages (WMA, weighted moving average).

One is for the whole amount of time, and the other is for half of the amount of time. Then, you multiply the shorter period weighted moving average by two and subtract the first moving average from that number. This will give you Hull’s moving average in its “raw” or “unsmoothed” form. Then, you find the square root of the number of periods by rounding it to the nearest whole number and using it to figure out the WMA from the raw HMA. This gives you the final moving average for Hull.

How to read the moving average of Hull

From this chart, you can see that Hull’s moving average is a smooth blue line that follows the general pattern of the green price chart. You can also see that it shows changes in general as they happen, without focusing on changes that go against the overall trend. A trader can look at this chart to see how the market is moving and when to buy or sell based on how the market moves in relation to Hull’s moving average.

Things to Consider

Hull’s moving average has its flaws, just like any other analytical tool. For instance, HMA can tell you what happened to the price in the past, but it can’t tell you what will happen in the future. Also, the Hull moving average doesn’t use moving average crossover signals like other moving averages do to help traders decide what to do.

In fact, Alan Hull does not recommend using crossover signals because they depend on lag, which the HMA is meant to get rid of. Also, it’s important to remember that using only one type of analytical tool is a sure way to get into trouble. Traders who use Hull’s moving average successfully use it along with other tools that help them see the market from a wider perspective.

Also, you should always remember that you need to do your own research and that the price of a stock, product, or cryptocurrency can go up and down. Never put in more money than you can afford to lose.