The Hull Moving Average is more recent in comparison to the traditional moving averages in technical analysis. In the 1990s, the Australian trader Alan Hull developed the moving average that carries his name for the purpose of being an average that is faster and less prone to false breakups in comparison to the market’s traditional moving averages of the time. It was created to solve the delay in responding to price indicators, but without losing the smoothness of the curve pointed out by the indicators.
How does HMA work?
The Hull Moving Average uses the Weighted Average and the square root of the analysed interval. HMA considers the integer value of the square root and division result (without the decimal portions). It’s widely used to identify operation exit points.
In the example below, we can see a comparison between a hull moving average, an arithmetic moving average and a weighted moving average, all set up for 16 intervals. You can check out more details about the types of averages by clicking here.
How is the calculation made?
HMAi = WMA( 2 * WMA ( Value , i/2) - WMA ( Valor , i ), √i )
WMA - Weighted Moving Average
Value - WMA result in the interval
I - Interval
HMA of 16 intervals in BTC/BRL with WMA(16) of 258.422,29 and WMA(8) of 262.024,97.
HMA(16) = √(( 2 * 262.024,97) - 258.422,29 ), √16)
HMA(16) = ( 524.049,94 - 258.422,29 ) , √16
So far, we have a gross HMA of 265.627,65
Continuing with the calculation, the integer resulting from the square root will be used to calculate a third WMA from the result of the first two WMA.
HMA(16) = 261.133,32
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