This is a 100-period simple moving average, and this is a 100-period exponential moving average. Now we know that the exponential moving average is different from the simple moving average because it gives more importance to the latest candles. But visually they are not that different from each other. The simple and exponential moving average are staying close to each other. But, if you add the same 100 period Hull moving average, even your dog can tell that the hull moving average is calculating the average in a different way and is showing a different value on the chart.
The Hull Moving Average was created by Alan Hull, and its main focus was to smooth out the moving average and reduce the lag. And that’s exactly what the Hull moving average does. On a trending chart, if you plot a 100 period SMA, EMA, and the Hull Moving average at the same time, you will notice that the 100 period Hull moving average will stay very close to the candles, while the Simple and Exponential will stay far away.
The Hull Moving Average is a moving average so people are going to use it to find the direction of the trend. But the creator of the HMA indicator Alan Hull does not recommend using the Hull as a crossover trading strategy. In other words, it is not recommended to use the Hull Moving Average to generate crossover signals. Which makes sense, because the whole point of making the HMA was to reduce the lag and show the change in direction quickly as possible.
In an uptrend, traders look for buying opportunities when the Hull moving average starts to rise up, and when the HMA is falling, traders look for short opportunities. Now let’s be honest, you are not going to take trades only based on a moving average. If you can trade only with a moving average, you can probably trade without using a moving average like Hull. Because if you look closely, you will notice that all Hull Moving Average is doing is sticking close to the price. And if you remove the Hull Moving Average, you can still easily tell where the price is going.
But what many of you wanted to find out was, if the Hull Moving Average was Better than the Simple and Exponential Moving Average Trading Strategies, and what will happen if we break the rules and use it as a crossover strategy. What will be the win rate of the Hull Moving Average Strategy?
The Hull Moving Average Crossover Trading strategy is easy to understand and goes like this. When the 100 period Hull moving average crosses above the 200-period simple moving average, it’s a buy signal. In the long setup, the stop loss goes below the 200 simple moving average. Similarly, when the 100 period Hull Moving Average crosses below the 200-period simple moving average, it’s a sell signal. In the short setup, the stop loss goes above the 200 period moving average. Furthermore, the entry candle should not be on or between the simple and Hull moving average. Simple as that.
So I tested the Hull Moving Average Trading Strategy 100 times, and here’s what I found out.
Number 1. The best part about the HMA strategy is the space between the Hull moving average and the Simple Moving Average. In a long setup, since we are entering the trades when the price is above both Hull and Simple Moving Average, the area between the Moving Averages is acting as the Cloud of the Ichimoku Cloud Indicator. If you have watched the Ichimoku Cloud Trading Strategy Video on the Trading Rush Channel, you already know that cloud is one of the best parts about the Ichimoku Cloud Indicator and how it filters the slow trending and range markets. By using the 200 period SMA with the 100 period Hull moving average, we are creating an area similar to the cloud that filters some of the range markets on a chart.
Number 2. If you take a look at the profit graph on the Trading Rush App, you will notice that Hull Moving Average was making money consistently at the beginning. This was when the price was making big moves after the entry signals. But since the market moves sideways most of the time, a couple of trades were lost in a row. At one point, the Hull Moving Average Trading Strategy lost 12 trades in a row. Now, remember, I tested this strategy with a 1.5 to 1 reward risk ratio to compare it with other trading strategies we have tested on the Trading Rush Channel. But while taking 100 trades with it, I noticed that many winning trades had the potential to make more than 2 times more profit than the risk. In other words, while using the Hull Moving Average Trading Strategy, it can sometimes be better to trail the stop loss to catch the big move, and to get a high reward risk ratio. I have already talked about some of the best trailing stop loss indicators on the Trading Rush Channel, check it out to learn more.
So after taking 100 trades with the Hull Moving Average Trading Strategy, I got an approximate win rate of 42 percent with a 1.5 to 1 reward risk ratio. Since we were booking more profit than the risk, the HMA trading strategy still made money in the Trading Rush App, but this profit was not as good as some other trading strategies we have tested on the Trading Rush Channel. It won 4 trades in a row but lost 12 trades in a row. The Hull Moving Average Crossover strategy is not that bad, it is just that your chances of making good money with it are low. But let’s see where it ranks up against other trading strategies we have tested so far, by giving the Hull Moving Average Trading Strategy a TR score.
If you have watched the Golden Cross Trading Strategy Video or are already familiar with it, you probably realized that the Hull moving average crossover strategy is very similar to the Golden Cross Strategy. And surprisingly, both strategies got the same win rate after testing 100 times. Since the Hull moving average got the same win rate as the Golden Cross, it gets a 4.2 out of 10 in the Win Rate category, just like the Golden Cross Strategy.
It gets a 7.5 in the easy-to-use category. And gets a 4 out of 10 in the Reliability Category. The profit graph of the Hull Moving Average Strategy was slightly better than the profit graph of the Golden Cross Strategy and less noisy when compared with the profit graphs of some other strategies that also got a win rate of around 42 percent. So in the consistent profits category, it gets a 4 out of 10. And in the quality of the Trades Category, it gets a 4.5 out of 10.
So the Hull Moving Average trading strategy gets a TR Score of 24.2 out of 50. And on the Trading Rush Website, it ranks 17th from the top, below the RSI Supertrend Trading Strategy, and above the Stochastic Strategy.
And that’s all.
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