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Hull Moving Average Filter | Trading

Strategy (Entry & Exit)
I. Trading Strategy
Developer: Alan Hull. Source: Kaufman, P. J. (2013). Trading Systems and Methods. New
Jersey: John Wiley & Sons, Inc. Concept: Trend following trading strategy based on low lag
moving averages. Research Goal: To verify performance of the Hull Moving Average
(HMA). Specification: Table 1. Results: Figure 1-2. Trade Filter: Long Trades: Two Hull
Moving Averages turn upwards. Short Trades: Two Hull Moving Averages turn
downwards. Portfolio: 42 futures markets from four major market sectors (commodities,
currencies, interest rates, and equity indexes). Data: 36 years since 1980. Testing
Platform: MATLAB®.
II. Sensitivity Test
All 3-D charts are followed by 2-D contour charts for Profit Factor, Sharpe Ratio, Ulcer
Performance Index, CAGR, Maximum Drawdown, Percent Profitable Trades, and Avg. Win /
Avg. Loss Ratio. The final picture shows sensitivity of Equity Curve.

Tested Variables: Slow_HMA_Length, Fast_HMA_Index (Definitions: Table 1):

Figure 1 | Portfolio Performance (Inputs: Table 1; Commission & Slippage: $0).
STRATEG
Y SPECIFICATION PARAMETERS

Auxiliary Hull Moving Average Formula:  

Variables: (A) The First Weighted Moving
Average (WMA1):
WMA1[i] = (Close[i − N + 1] + 2 ×
Close[i − N + 2] + 3 × Close[i − N +
3] + … + N × Close[i]) / (N × (N +
1) × 0.5) where:
N = Hull Moving Average look back;
Index: i ~ Current Bar.
(B) The Second Weighted Moving
Average (WMA2):
 WMA2[i] = (Close[i − M + 1] + 2 ×
Close[i − M + 2] + 3 × Close[i − M +
3] + … + M × Close[i]) / (M × (M +
1) × 0.5) where:
M = round(N/2);
Index: i ~ Current Bar.
(C) The Hull Moving Average
(HMA):
Delta[i] = 2 × WMA2[i] − WMA1[i];
HMA[i] = (Delta[i − K + 1] + 2 ×
Delta[i − K + 2] + 3 × Delta[i − K +
3] + … + K × Delta[i])/(K × (K + 1)
× 0.5) where:
K = round(SquareRoot(N));
Index: i ~ Current Bar.

Setup: Variables: Slow_HMA_Leng

(i) Slow_HMA_Length; th = [60, 1000],
(ii) Fast_HMA_Length = Step = 20;
Fast_HMA_Index × Fast_HMA_Index
Slow_HMA_Length. = [0.2, 1.0], Step
Slow Trend: = 0.02;
Slow_HMA(Close, Slow_HMA_Len
gth) is the Slow Hull Moving
Average of the close price over
a period of Slow_HMA_Length. 
When the Slow_HMA turns upwards,
the slow trend is bullish: i.e.
Slow_HMA[i] > Slow_HMA[i − 1];
Index: i ~ Current Bar.
When the Slow_HMA turns
downwards, the slow trend is bearish:
i.e. Slow_HMA[i] < Slow_HMA[i −
1];
Index: i ~ Current Bar.
Fast Trend:
Fast_HMA(Close,
Fast_HMA_Length) is the Fast Hull
Moving Average of the close price
over a period of Fast_HMA_Length. 
When the Fast_HMA turns upwards,
the fast trend is bullish: i.e.
Fast_HMA[i] > Fast_HMA[i − 1];
Index: i ~ Current Bar.
 When the Fast_HMA turns
downwards, the fast trend is bearish:
i.e. Fast_HMA[i] < Fast_HMA[i −
1];
Index: i ~ Current Bar.

Long Signal:
Slow Trend & Fast Trend (Defined in
the Setup) are in a bullish mode.
Short Signal:
Slow Trend & Fast Trend (Defined in
Filter: the Setup) are in a bearish mode.  

Long Trades: A buy at the open is

placed after a Long Signal (i.e. Slow
Trend & Fast Trend are in a bullish
mode).
Short Trades: A sell at the open is
placed after a Short Signal (i.e. Slow
Trend & Fast Trend are in a bearish
Entry: mode).  

Hull Moving Average Exit: Long

Trades: A sell at the open is placed
when Slow Trend or Fast Trend
(Defined in the Setup) is no longer
bullish. Short Trades: A buy at the
open is placed when Slow Trend or
Fast Trend (Defined in the Setup) is
no longer bearish.
Stop Loss Exit: ATR(ATR_Length)
is the Average True Range over
a period of ATR_Length. ATR_Stop
is a multiple of ATR(ATR_Length).
Long Trades: A sell stop is placed at
[Entry − ATR(ATR_Length) *
ATR_Stop]. Short Trades: A buy ATR_Length =
stop is placed at [Entry + 20;
Exit: ATR(ATR_Length) * ATR_Stop]. ATR_Stop = 6;

Sensitivity Slow_HMA_Length = [60, 1000],  

Test: Step = 20
Fast_HMA_Index = [0.2, 1.0], Step =
 0.02

Initial_Capital = $1,000,000
Fixed_Fractional = 1%
Portfolio = 42 US Futures
ATR_Stop = 6 (ATR ~ Average True
Position Range)
Sizing: ATR_Length = 20  

42 futures markets; 36 years

Data: (1980/01/01−2016/06/30)  

Table 1 | Specification: Trading Strategy.

III. Sensitivity Test with Commission & Slippage
Tested Variables: Slow_HMA_Length, Fast_HMA_Index (Definitions: Table 1):
Figure 2 | Portfolio Performance (Inputs: Table 1; Commission & Slippage: $100 Round Turn).
IV. Benchmarking
We benchmark the base case strategy against alternatives:

Case #1: Slow_HMA_Length = 250; Fast_HMA_Index = 1 (Base Case).

Case #2: Slow_HMA_Length = 500; Fast_HMA_Index = 1.
Case #3: Slow_HMA_Length = 750; Fast_HMA_Index = 1.
Case #4: Slow_HMA_Length = 1000; Fast_HMA_Index = 1.
Fixed
Fractional
Sizing Case #1 Case #2 Case #3 Case #4

Net Profit 48,750,68 129,227,06 359,229,43 154,497,67

($) 6 3 0 2

Sharpe
Ratio 0.60 0.75 0.93 0.86

Ulcer 0.53 0.75 1.18 0.96

Performanc
 e Index
(UPI)

Profit
Factor 1.10 1.20 1.45 1.55

CAGR (%) 11.50 14.97 18.94 16.55

Max.
Drawdown
(%) (58.03) (57.98) (49.90) (50.03)

Percent
Profitable
Trades (%) 30.80 29.35 30.51 30.99

Avg. Win /
Avg. Loss
Ratio 2.48 2.90 3.31 3.45

Table 2 | Inputs: Table 1; Fixed Fractional Sizing: 1%; Commission & Slippage: $100 Round
Turn.
V. Rating: Hull Moving Average (HMA) Filter | Trading
Strategy
A/B/C/D
VI. Summary
(i) The Hull Moving Average is perceived as an improved moving average with reduced lag
(Figure 3); (ii) The slower frequency of trading is preferred, i.e. Slow_HMA_Length > 500
(Figure 1-2); (iii) The second moving average, the Fast Hull Moving Average, is an unnecessary
complication and can be eliminated (Figure 1-2). When Fast_HMA_Index = 1, both moving
averages have the same length.
 Figure 3 | Hull Moving Average (HMA) vs. Simple Moving Average (SMA) vs. Exponential
Moving Average (EMA); Look Back: 100 Bars.
Related Entries: Zero Lag Moving Average Filter (Entry & Exit) | Simple Moving Average
Filter (Entry & Exit) | Bollinger Bands – Momentum Model (Setup) | Price Momentum Model
(Benchmark)
Related Topics: (Public) Trading Strategies
CFTC RULE 4.41: HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE
RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY
HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED
TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO
REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
RISK DISCLOSURE: U.S. GOVERNMENT REQUIRED DISCLAIMER | CFTC RULE 4.41
Codes: matlab/hull/hma
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