wo-Way Relay Channel (TWRC) plays an important role in relay networks, and efficient relaying protocols are particularly important for this model. However, existing protocols may not be able to realize the potential of TWRC if the two independent fading channels are not carefully handled. In this paper, a Hybrid DeModulate-Forward (HDMF) protocol is proposed to address such a problem. We first introduce the two basic components of HDMF - direct and differential DMF, and then propose the key decision criterion for HDMF based on the corresponding log-likelihood ratios. We further enhance the protocol so that it can be applied independently from the modulation schemes. Through extensive mathematical analysis, theoretical performance of the proposed protocol is investigated. By comparing with existing protocols, the proposed HDMF has lower error rate. A novel scheduling scheme for the proposed protocol is introduced, which has lower length than the benchmark method. The results also reveal the protocol's potential to improve spectrum efficiency of relay channels with unbalanced bilateral traffic.