Description

• A weighted average, it has two advantages- reducing lag and dampening smoothening effect. It uses Weighted Moving Average as an input but substitutes period ‘n’ with the square root of period ‘√n’
• It was developed by Alan Hull
• It responds more quickly to recent data compared to other weighted averages. However, it can overshoot at some points

Interpretation

• The price line moving above the HMA indicates an uptrend suitable for Buy trades
• The price line moving below the HMA indicates an downtrend suitable for Sell trades

Default Parameters Used/Inputs

• Data line- Close line, High line, Open line, Low line or others
• Bars – number of bars for which HMA has to be calculated

Returns/Output

HMA graph line with minimized lag and dampened smoothing

Formula

HMA = WMA[2*WMA(n/2)] – WMA(n),sqrt(n)