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TOPIC: MACD-Histogram

MACD-Histogram 5 years 9 months ago #4016

If anyone is looking for more comprehensive information on using the MACD indicator, I would suggest checking our guide --

http://pennystocks.la/macd-indicator

Please let me know if you have any questions or comments on the guide, as I'd gladly take them into consideration when we release an update.
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MACD-Histogram 8 years 3 months ago #326

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Developed by Thomas Aspray in 1986, the MACD-Histogram measures the distance between MACD and its signal line (the 9-day EMA of MACD). Like MACD, the MACD-Histogram is also an oscillator that fluctuates above and below the zero line. Aspray developed the MACD-Histogram to anticipate signal line crossovers in MACD. Because MACD uses moving averages and moving averages lag price, signal line crossovers can come late and affect the reward-to-risk ratio of a trade. Bullish or bearish divergences in the MACD-Histogram can alert chartists to an imminent signal line crossover in MACD.

Four Steps Removed
The MACD-Histogram is an indicator of an indicator. In fact, MACD is also an indicator of an indicator. This means that the MACD-Histogram is four steps removed from the price of the underlying security. In other words, it is the fourth derivative of price.

•First derivative: 12-day EMA and 26-day EMA
•Second derivative: MACD (12-day EMA less the 26-day EMA)
•Third derivative: MACD signal line (9-day EMA of MACD)
•Fourth derivative: MACD-Histogram (MACD less MACD signal line)
The base for this indicator is the security's price. It takes four steps to get from the actual price to the MACD-Histogram. Talk about massaging the data. While not necessarily a bad thing, chartists should keep this in mind when analyzing the MACD-Histogram. It is an indicator of an indicator. Therefore, it is designed to anticipate signals in MACD, which in turn is designed to identify changes in the price momentum of the underlying security.

As with MACD, the MACD-Histogram is also designed to identify convergence, divergence and crossovers. The MACD-Histogram, however, is measuring the distance between MACD and its signal line. The histogram is positive when MACD is above its signal line. Positive values increase as MACD diverges further from its signal line (to the upside). Positive values decrease as MACD and its signal line converge. The MACD-Histogram crosses the zero line as MACD crosses below its signal line. The indicator is negative when MACD is below its signal line. Negative values increase as MACD diverges further from its signal line (to the downside). Conversely, negative values decrease as MACD converges on its signal line.
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