Description:
The Hull Moving Average (HMA) is one more option of an ideal MA that enables smoothing price movements with the help of weighted averages. This forex technical indicator was developed by Alan Hull.
Formula:
HMA(n) = WMA(2*WMA(n/2) - WMA(n)),sqrt(n))
Trading use:
The HMA indicator was created as an powerful price filter. It consists of standard functions of most moving averages; it affects the price as support/resistance and market entry decision-making on the basis of the angle of the curves inclination. But also, the Hull Moving Average enables a trader to figure out the trend with the assistance of the color model built in the indicator.
In the event a downtrend dominates, the HMA changes color from blue to red, thus suggesting a buying opportunity because the price may fall further after that. The change of color would also signal a market entry.
The HMA not only smoothes price changes, but also eliminates signals’ delays. This effect was reached by virtue of some peculiarities in calculation. Thus, a trader can use the indicator in trades with no fears that the HMA would provide delayed signals to buy an asset or enter the market.
In addition to independent use of the HMA in trading, the MetaTrader indicator can be applied as market entry filter with trades being opened on the basis of other indicators or different methods of analysis. In this case, the moving average can be used for closing trades. The mechanism is the following: when the indicator changes its color to the opposite one, a trader should close a trade opened in line with the price trend and wait for a new market entry signal.
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