Hull Moving Average, developed by Alan Hull is an extremely useful indicator to overcome the lag associated with traditional moving averages. Probably moving average is the simplest of all indicators but still it is the most essential component of traders’ toolbox. It aids to follow and stay with the ongoing trend, whether bullish or bearish. Any reversal in trend is indicated by directional change or crossover of moving averages.
But the major problem with moving average is that it signals trend reversal few candles after it actually happened. Any trend follower must have come across the situation where he booked profit at a point which is lower than the max unrealized profit for the trade. This happens because of this lag associated with moving average or any other trend following indicator. In order to overcome this lag, there are other variations of moving average available namely Exponential moving average or Weighted moving average. But they too lag a little and are not 100% accurate.
Hull moving average, on the other hand, reduces this lag almost 99.9%. It is extremely fast and reactive to price movements. Also it is relatively smoother as compared to any other trend following indicator.
Also Read: McGinley Dynamic Trading System
Hull moving average has found a spot in all major charting platforms around the world. Check the below Nifty chart from TradingView where Hull moving average is overlayed along with simple moving average and exponential moving average. Clearly Hull moving average indicates trend reversal faster and accurately than other two.
