MACD Histogram Explained Simply and Understandably. // indicator divergence trading strategy buy sell signal basics crossover youtube vs thinkorswim wis formula tutorial beginners day secrets video chart patterns youtube settings daily chart rsi stochastics macd technical scalping basics how to use david moadel
welcome to looking at the markets with David Motel today I wanted to explain
the MACD indicator histogram to you so let's get started the MACD indicator
includes the MACD line the signal line and the histogram the MACD line is
calculated as the 12-day exponential moving average minus the 26th day
exponential moving average that's the MACD line the signal line is the 9-day
exponential moving average of the MACD line the MACD histogram shows how much
distance there is between the MACD line and the signal line the histogram is
calculated as the MACD line minus the signal line if you see in parentheses 12
26 9 next to the MACD indicator that means we're using the standard settings
the 12 day exponential moving average that's the 12 minus the 26 day
exponential moving average that's the 26 is being used for the MACD line that's
the formula and the nine day exponential moving average that's the nine of the
MACD line is being used for the signal line so that's where the 12 26 and 9
standard settings come from for the MACD indicator the histogram looks like a
bunch of bars in blue that's right here a bunch of blue bars okay
going upward like these are going upward or downward when the bars go upward that
means that the the MACD line that's the black line here is above the signal line
and the signal line is red here okay so like over here you see the bars are
upward they're above the mid line here and that's because the MACD line is
above the signal line when the bars go downward like these are below the mid
line that means that the MACD line is below the signal line the bigger the
histogram bars are the bigger the divergence or difference is between the
MACD line and the signal line so we can see it over here you see how big these
blue bars over here on the histogram well that's because there's a big
divergence or difference between the two lines the MACD line and the signal line
as the two lines come closer together you can see the histogram bars get
smaller the same is true over here even though these bars are below the midline
the bars are downward bars but still this is a big bar here these bars are
pretty big over here because there's still a big difference or divergence
between the two lines the MACD line and they say the signal line over here
there's not much difference or divergence between the two lines and so
the bars the histogram bars are smaller so we call the call it a divergence when
the two lines get far apart and the bars get bigger like over here and over here
we can call it a convergence when the MACD line and the signal line come
closer together like over here and the histogram bars shrink or get smaller
also over here when they come together and the bars get smaller hence the name
if you ever wondered why they call it MACD its MACD moving average Convergence
divergence so there you go now you know why why it's called that so how do you
use it well I'll give you one way some people might use the histogram as a buy
or sell signal if the histogram bars are below the middle line this is the mid
line right here okay if the histogram bars are below the middle line but our
sloping upward like over here see how the bars are sloping upward see the I
showed it with an arrow here just to show that they're sloping upwards this
could be a buy signal if the histogram bars are above the mid line above the
middle line like these bars but our sloping downward and I showed that with
a red arrow here just to just to show you where it is if the bars are above
the mid line but sloping downward this could be a sell signal in other words if
the histogram bars are converging up to the mid line this could be a buy signal
if the histogram bars are converging down to the mid line this could be a
sell signal as always please be cautious with your
trading and don't just rely on one indicator to make your decisions alright
so that was a basic introduction to the MACD histogram so please give this video
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tight tight