MACD histogram quantifies the separation (or deviation) and convergence between
MACD and its moving average nine (signal line). In other words, it highlights the difference
between MACD and the signal line. It was developed by Thomas Aspray in 1986.
Its purpose is to warn MACD traders of a possible impending MACD's crossover with the
signal line. In effect, a crossover is expected when the difference between MACD and its
moving average nine is decreasing speedily. On the other hand, a crossover is not a matter
of urgency when an apparent deviation is in place.
Note that when there is a significant difference between MACD and the signal line, it also
signifies that the current momentum (bullish or bearish) is intact. However, that is only the
theory. As always, one should not apply the theory to the letter.
There is another way traders can utilize the MACD histogram. When there is a bullish divergence
between the histogram and MACD, traders will anticipate an imminent bullish crossover. On the
other hand, they will expect a high probability bearish crossover if a bearish divergence is in place.
Author = "George Beaulieu founder of stochastic-macd.com"
View the chart.
Image = "NIKE Inc stock on the four-hour chart that is exhibiting
a bearish MACD Histogram divergence prior to MACD indicator
crossing below its signal line."
Generally, day and swing traders look for divergence trading setups by comparing either the
histogram to MACD indicator or the price-action. Moreover, to avoid misusing the
MACD histogram, one should always remember that the MACD histogram is a technical indicator
of another indicator (MACD).
Hence, one shall always confirm its signals with direct trading signals (price action). Indeed, it is
a trading error to buy or sell willy-nilly because of the MACD histogram trading signals.
MACD Histogram And Zero line
Like MACD indicator, the histogram is also centered around the zero line. If MACD is above its
moving average period nine, the histogram dwells in the bullish zone above the equilibrium line.
However, it resides below the equilibrium line when MACD crosses below the signal.
MACD crosses above its signal line, it indicates that MACD is sloping up or has a positive slope.
Consequently, it is compulsory actually to check if MACD is sloping up because sometimes that
is not the case.
The opposite is also true when MACD crosses below the signal line. In all cases, if one is trading MACD crossovers or its histogram, one must rely on its actual slope.
In all cases, if one is trading MACD crossovers or its histogram, one must rely on its actual slope.
View the chart.
Image = "JP Morgan stock on the daily chart is showing the MACD Histogram
that is oscillating around its own zero like like the MACD indicator"
This video tutorial teaches day and swing traders how one can trade the MACD Histogram like
a professional trader. In effect the first thing one ought to grasp is that the MACD Histogram
is primarily a technical indicator for MACD itself. It helps traders to foretell when the standard
MACD (12, 26, 9) is about to cross above or below the its signal line.
This tutorial is not about MACD Histogram theory, but aims to show
traders practical MACD Histogram trading tips and tricks that they can apply in the financial
markets in view to avoid trading mistakes and maximize profit.
We highly recommend to traders to watch the full length of this unique MACD Histogram video.
MACD Histogram divergences and their effective use.
Primary role of MACD Histogram.
Identifying the surge in momentum with MACD Histogram.
Pinpointing reversal trading set-ups with MACD Histogram.
Significant high and low of MACD Histogram.
Combining key support and resistance levels with MACD Histogram.
How to avoid MACD Histogram trading mistakes?
And more tips and tricks for trading the MACD Histogram like a pro.
Watch, rate and share this video tutorial today.
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