What is the difference between WMA and Hull Moving Average (HMA) in crypto?

The Weighted Moving Average (WMA) prioritizes recent prices for faster trend signals, while the Hull Moving Average (HMA) reduces lag further with advanced smoothing, making it ideal for timely crypto trading decisions.

Jul 31, 2025 at 05:35 pm

Understanding Weighted Moving Average (WMA) in Cryptocurrency Trading

The Weighted Moving Average (WMA) is a technical indicator used in cryptocurrency trading to smooth price data over a specified period. Unlike the Simple Moving Average (SMA), which assigns equal weight to all data points, WMA gives greater importance to recent prices. This makes it more responsive to new information, which is crucial in the fast-moving crypto markets. The calculation involves multiplying each closing price by a weighting factor, with the most recent price receiving the highest multiplier.

For example, in a 5-period WMA:

• The most recent price is multiplied by 5
• The previous day by 4
• Then 3, 2, and 1 respectively
• The sum of these products is divided by the sum of the weights (1+2+3+4+5 = 15)

This results in a line that reacts more quickly to price changes than the SMA. Traders use WMA to identify short-term trends and potential reversal points. Because it emphasizes recent data, it can help detect momentum shifts earlier, which is particularly useful during volatile crypto price swings.

How Hull Moving Average (HMA) Enhances Moving Average Performance

The Hull Moving Average (HMA) was developed by Alan Hull to reduce lag while maintaining smoothness in trend identification. It is especially favored in cryptocurrency trading due to its ability to respond quickly to price changes without introducing excessive noise. HMA achieves this by using a combination of weighted moving averages in a unique formula.

The HMA calculation involves three steps:

• Compute a WMA over a specified period (e.g., 16 days)
• Compute a WMA over half that period (e.g., 8 days)
• Multiply the shorter WMA by 2 and subtract the longer WMA
• Apply a final WMA to the result using the square root of the original period

This multi-step process reduces lag significantly. For instance, in a 16-period HMA, the final smoothing uses a 4-period WMA (since √16 = 4). The outcome is a moving average that sticks closely to price action and generates earlier signals than traditional WMAs or SMAs. This responsiveness makes HMA ideal for identifying entry and exit points in highly volatile crypto assets like Bitcoin or Ethereum.

Comparing Responsiveness and Lag Between WMA and HMA

One of the most critical differences between WMA and HMA lies in lag reduction. While WMA already improves upon SMA by weighting recent prices more heavily, it still exhibits noticeable delay during sharp price movements. HMA, by design, minimizes this lag through its composite calculation method.

In practical crypto trading:

• During a sudden Bitcoin rally, WMA may take several candles to reflect the upward momentum
• HMA, due to its double smoothing and correction mechanism, will align with the trend much faster
• This allows traders using HMA to enter positions earlier and potentially capture more of the move

The reduced lag in HMA is not just theoretical—it’s observable on price charts. When overlaid on a 1-hour or 4-hour BTC/USDT chart, HMA tends to hug the price curve tighter than WMA, especially during breakouts or corrections. This characteristic makes HMA a preferred choice for short-term crypto traders who rely on timely signals.

Smoothness and Noise Handling in Crypto Price Data

While responsiveness is important, excessive sensitivity can lead to false signals caused by market noise. WMA, though faster than SMA, can still produce whipsaws during sideways crypto markets. HMA balances speed and smoothness by applying a final WMA to the derived values, which filters out erratic fluctuations.

For example:

• In a ranging Ethereum market, WMA might cross above and below the price multiple times, generating misleading buy/sell signals
• HMA remains smoother and avoids unnecessary crossovers due to its final smoothing step
• This helps traders avoid overtrading during consolidation phases

The square root period smoothing in HMA plays a crucial role here. It ensures that even though the indicator is fast, it doesn’t sacrifice too much stability. This balance is particularly valuable in crypto, where prices often oscillate within wide bands before breaking out.

Practical Application: Setting Up WMA and HMA on Trading Platforms

To use WMA and HMA effectively, traders must know how to apply them on popular crypto trading platforms like TradingView, Binance, or MetaTrader.

Adding WMA:

• Open the chart of a cryptocurrency pair (e.g., BTC/USDT)
• Click on "Indicators" and search for "Weighted Moving Average"
• Set the period (common choices: 9, 14, 20)
• Adjust color and thickness for visibility
• Apply to closing price by default

Adding HMA:

• Search for "Hull Moving Average" in the indicator library
• Enter the desired period (e.g., 20)
• Choose color (often blue or green for clarity)
• Confirm and apply to chart

Once both are on the chart:

• Compare how each reacts to price changes
• Observe crossover points between price and the moving averages
• Use HMA for faster signals, WMA for confirmation

Many traders use HMA as a primary trend filter and WMA as a secondary confirmation tool. For instance, a long position might be taken when price crosses above HMA, and WMA confirms the upward slope shortly after.

Backtesting WMA vs HMA in Crypto Strategies

To evaluate performance, traders often backtest strategies using historical crypto data.

Steps to backtest:

• Select a cryptocurrency and timeframe (e.g., 1-day chart of Solana for 2 years)
• Apply both WMA (14-period) and HMA (14-period) to the chart
• Define entry rules: e.g., buy when price closes above the moving average
• Define exit rules: e.g., sell when price closes below the moving average
• Count the number of trades, win rate, and total profit/loss

Results typically show:

• HMA generates earlier entry signals, leading to higher profit potential per trade
• WMA produces fewer false signals during choppy markets, improving win rate
• HMA may have more whipsaws in sideways conditions despite its smoothness

Traders can optimize by combining both:

• Enter on HMA crossover
• Require WMA to be sloping upward as a filter
• This dual confirmation reduces risk while maintaining speed

Frequently Asked Questions

Can HMA be used on all cryptocurrency timeframes?

Yes, HMA is effective across all timeframes—from 1-minute scalping charts to weekly Bitcoin analysis. The key is adjusting the period: shorter periods (e.g., 9) for intraday trading, longer periods (e.g., 50) for swing or position trading.

Is WMA better than SMA for crypto trading?

WMA is generally more responsive than SMA because it emphasizes recent prices, making it more suitable for dynamic crypto markets. However, it may still lag behind HMA in fast-moving conditions.

Why does HMA use the square root of the period?

The square root is used in the final smoothing step to maintain a balance between responsiveness and smoothness. It ensures the indicator doesn’t become too noisy while still reducing lag from traditional moving averages.

Can I use WMA and HMA together in a trading strategy?

Absolutely. Many traders use HMA for early trend detection and WMA as a confirmation filter. For example, a buy signal might require both price to cross above HMA and WMA to be rising, improving signal reliability.