Introduction to the Hull Moving Average Indicator
Moving average lines are the most fundamental trend tracking indicator used by traders. They do, however, have a recurrent vulnerability, which might be latency or sensitivity to erroneous signals. Alan Hull’s Hull Moving Average is a modified version of the moving average that seeks to minimize both latency and its susceptibility to false signals.
What is the Hull Moving Average Indicator?
The Hull Moving Average (HMA) Indicator is a variant of the Simple Moving Average (SMA) line. It was changed to plot a moving average line that is particularly sensitive to price changes. At the same time, it has a smoothing effect, which reduces the false reversal signals caused by market noise.
How the Hull Moving Average Indicator Works?
The Hull Moving Average is calculated using a formula derived from the Weighted Moving Average (WMA). The Hull Moving Average formula is shown below.
HMA = WMA (2 * WMA (n/2) – WMA(n)), sqrt(n))
How to use the Hull Moving Average Indicator for MT5
The Hull Moving Average contains three fundamental factors and choices that allow traders to adjust the sensitivity of the line it prints.
The “Hull period” refers to the number of bars used by the indicator in its computations.
The term “Hull power” refers to the amount of power employed in the HMA formula.
The term “price” refers to the price point on a bar that would be used to compute the moving average line. The Open, High, Low, Close, Median Price, Typical Price, and Weighted Price are all possibilities.
The Hull Moving Average can be utilized in the same way that a standard moving average line is.
Based on the slope of its line and the overall position of price movement in reference to it, it may be used to assess momentum and trend direction.
It may also be used as a dynamic support or resistance line, allowing traders to forecast potential reversals.
It may also be used as part of a moving average crossover to indicate probable trend reversals.
The curving up or down of the HMA slope can also be used to identify reversals. This is best done in conjunction with the trend or a support or resistance line.
Buy Trade Setup
When to Enter?
Determine an uptrending market with an obvious upward sloping support line. Wait for a retracement around the support line. As the HMA line curves up, place a buy order. Set your stop loss below the entrance candle on the support.
When to Exit?
Close the deal as soon as the price movement indicates a bearish reversal.
Sell Trade Setup
When to Enter?
Identify a market in a decline with a definite downward sloping resistance line. Wait for a retracement around the resistance line. As the HMA line spirals down, place a sell order. Set the stop loss above the entrance candle on the resistance.
When to Exit?
Close the deal as soon as the price movement indicates a positive reversal.
The Hull Moving Average is a good example of a moving average line. This is due to the fact that it has mitigated the flaws of a standard moving average line, which are latency and misleading signals. It’s not ideal, but it’s a great starting point.