The Moving Average Convergence Divergence Histogram (MACD Histogram) is a technical analysis tool used to identify potential trend reversals and generate buy or sell signals in financial markets. It is derived from the MACD indicator, which consists of two lines – the MACD line and the signal line.
The MACD Histogram represents the difference between the MACD line and the signal line. It provides a visual representation of the momentum and strength of price movements. When the MACD line crosses above the signal line, it indicates a bullish (buy) signal, while a crossover below the signal line suggests a bearish (sell) signal.
The MACD Histogram oscillates above and below a zero line. Positive values above the zero line indicate upward momentum, while negative values below the zero line suggest downward momentum. The magnitude of the histogram bars indicates the strength of the price movement.
Traders and investors use the MACD Histogram to identify potential entry or exit points in a market and to confirm the strength of a trend. It is a popular tool in technical analysis and is frequently used in conjunction with other indicators and chart patterns.