What is the Hull Moving Average (HMA)?
The Hull Moving Average (HMA), improves upon traditional moving averages by using weighted moving averages (WMA) across varying time periods. This method prioritizes recent price movements, offering you a smoother and more responsive tool to gauge market trends.
The Hull Moving Average (HMA), developed by Alan Hull in 2005, is a popular tool designed to address the common issues of lag and noise found in traditional moving averages. By using weighted moving averages, the HMA smooths out price data more effectively, providing a clearer picture of market trends.
The HMA formula involves three key steps:
Calculate the weighted moving average (WMA) for half of the specified time period.
Calculate the WMA for the full specified time period.
Calculate the WMA for the square root of the specified time period.
This method places greater emphasis on recent price movements, making the HMA more responsive to market changes while maintaining smoothness in the data. As a result, you can often find the HMA to be a more reliable indicator for identifying trends early.
The Hull Moving Average (HMA) is calculated by taking the difference between the weighted moving averages (WMA) of different periods. This approach results in a smoother and more responsive moving average, making it easier to identify market trends.
Trading with the HMA
You can use the HMA in various ways to determine entry and exit points:
Price Crossing the HMA Line
Bullish Signal: When the price of an asset crosses above the HMA, it may indicate the start of an uptrend.
Bearish Signal: Conversely, when the price crosses below the HMA, it may signal the beginning of a downtrend.
HMA Line Slope
Upward Slope: An upward-sloping HMA suggests a bullish trend.
Downward Slope: A downward-sloping HMA indicates a bearish trend.
Flat Slope: A flat HMA may indicate a ranging market with no clear trend.
HMA Crossovers
Bullish Crossover: When a shorter-term HMA (e.g., 10-period) crosses above a longer-term HMA (e.g., 20-period), it can signal a bullish trend.
Bearish Crossover: When a shorter-term HMA crosses below a longer-term HMA, it can indicate a bearish trend.
On Cryptohopper we only use the Crossover signals. Alternatively, you can use Tradingview and then send signals to Cryptohopper from there and then trade in the other ways mentioned.
Price and HMA Divergence
If the asset’s price makes higher highs or lower lows, but the HMA does not follow suit, it may indicate a divergence. This divergence can suggest that the current trend is weakening or about to reverse.
By incorporating these signals, traders can use the HMA to better understand market movements and make more informed trading decisions.
Adjustable Parameters for HMA on Cryptohopper
The following parameters can be adjusted based on your preferences and risk tolerance on Cryptohopper:
Chart Period: This defines the timeframe you want to use, representing the candle size the indicator operates on. You can choose several timeframes ranging from 1-minute to 1-day.
OHLCV Value: The HMA can be calculated using different types of price data, such as closing price, open price, high price, or low price. While the closing price is the most commonly used, you can select other types of price data if you believe they provide a better representation of the security's performance.
Short Period: This parameter determines the number of data points that the short HMA for the crossovers strategy is calculated over.
Long Period: This sets the number of data points that the long HMA for the crossovers strategy is calculated over.
By adjusting these parameters, you can customize the HMA to suit your specific trading strategy and risk tolerance on Cryptohopper.
