What it measures

The Hull moving average is Alan Hull's answer to the lag of ordinary averages: a smooth line that turns with price instead of after it. It does this by extrapolating, which is also where its problems come from.

The calculation

Three weighted moving averages:

raw = 2 × WMA(price, n / 2) − WMA(price, n) HMA = WMA(raw, √n)

The first line doubles a fast average and subtracts a slow one, which pushes the result ahead of price; the second line smooths the result over the square root of the length. A 16-period HMA uses WMAs of 8, 16 and 4.

Inputs and defaults

  • Length: 9, 16 and 55 are common; the square-root step means odd lengths get rounded.
  • Source: close.

How it is read

As a trend line whose colour flips when its slope changes: rising is long, falling is short. Many Hull strategies in the screened universe are exactly that rule with a filter or two.

Where it fails

The extrapolation that removes lag also overshoots: the HMA runs past price at turns and can flip twice around a single swing. In a range, slope flips arrive almost every bar. A smooth line with no lag is a line that is partly guessing, and the guess is wrong exactly when the market changes character.

How the desk reads it

A Hull-based rule is read as a fast trend rule and judged on the same two numbers as any other: trade count, and the drawdown in the sideways months. Less lag always arrives with more flips, and the flips are where the fees go.

In the desk's screen

Of the 614 screened strategies in the library, 21 (3.4%) use this indicator somewhere in their logic.

8 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.