We investigate the motion of two immiscible fluids in a porous medium described by a two-phase flow system. In the capillary pressure relation, we include static and dynamic hysteresis. The model is well established in the context of the Richards equation, which is obtained by assuming a constant pressure for one of the two phases. We derive an existence result for this hysteresis two-phase model for non-degenerate permeability and capillary pressure curves. A discretization scheme is introduced and numerical results for fingering experiments are obtained. The main analytical tool is a compactness result for two variables that are coupled by a hysteresis relation.