0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Mixed
Oil - US Crude
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Mixed
GBP/USD
Bullish
USD/JPY
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • The Euro has been struggling to maintain its upside momentum. Is EUR/USD readying to turn lower? EUR/AUD may be aiming to rise, but has EUR/CAD topped? Find out from @ddubrovskyFX here: https://t.co/vlJM3iQIYS https://t.co/8FGl10wDto
  • Third consecutive weekly gain in the #SP500 as of today's close, rising 0.63% #Fed balance sheet gained by 0.18% over the same period after shrinking -0.06% previously Generally speaking, the size of the b/s has remained more or less unchanged for a month https://t.co/0TrEA5RGmA
  • The outlook for gold might look a little tenuous at the moment, but this won’t be the first time a strong bull market has shown signs of a potential top due to short-term price action. Get your $XAUUSD technical analysis from @PaulRobinsonFX here: https://t.co/N8a84hRnHN https://t.co/jCEkFzCxEr
  • Well, I don't know who has had it worse this week: Barca or Kodak
  • GBP/USD is either treading water at resistance and is nearing a breakout or is working on developing a top. Get your $GBPUSD technical analysis from @PaulRobinsonFX here:https://t.co/RnrBCFE3gt https://t.co/bDWWjzT57m
  • Stop watching the Champions League game. The FX markets are still open
  • After a swift recovery from the March 2020 low, EUR/USD price action has been in favor of the bulls. Get your EUR/USD market update here: https://t.co/goRwqwO1iC https://t.co/S3LsxMOP1E
  • Precious Metals Update: #Gold 1945.41(-0.42%), #Aluminum 1763.50 (-1.32%), and #Copper 6256.00 (-2.74%) [delayed]
  • Retail Gold CFD traders at IG increased their bullish exposure these these past few weeks. Long interest has hit a new high and the net position is near its cyclical highs for the past year https://www.dailyfx.com/sentiment?ref-author=Kicklighter&CHID=9&QPID=917719 https://t.co/MvbWuuYUcf
  • Fed's Kashkari says not much more the #Fed can do until COVID is contained - BBG
The MACD Histogram and How It Works as a Buy/Sell Signal

The MACD Histogram and How It Works as a Buy/Sell Signal

2020-01-09 08:35:00
Warren Venketas, Markets Writer
Share:

MACD histogram talking points:

  • The MACD as a lagging indicator
  • MACD histogram: What does the histogram represent?
  • Using MACD histograms as buy/sell signals

The MACD as a Lagging Indicator

The MACD is an indicator that uses exponential moving averages (EMA) to determine trend strength along with entry points based on crossovers.

Traders who use the MACD indicator often are critical of the fact that it will signal an entry after the initial move has begun and therefore leave pips behind. As such, many traders wanting to enter a trade sooner dismiss it as a “lagging” indicator.

A lagging indicator is a technical indicator that uses past price data to formulate the actions of the indicator itself. Therefore, all indicators are lagging since they are computed on trading data that has already taken place and then factored in with what is occurring.

In the case of the MACD indicator, the most widely used entry signal is when the MACD line crosses over the signal Line in the direction of the trend. Since these two lines are simply two moving averages, by their very nature the crossover will not occur until the move itself is under way. Some traders prefer this method of entry as it offers more confirmation that the move is more likely to continue in that direction however the MACD histogram can offer an earlier signal to enter.

MACD Histogram: What does the Histogram Represent?

The histogram or “bar chart” included in the background of the MACD (see images below) displays the difference between the MACD and signal line. When the MACD is above the signal line, the bar is positive. When the MACD is below the signal line, the bar is negative. The actual height of the bar is the difference between the MACD and signal line itself.

MACD histogram:

histogram formula

For more aggressive traders who are not interested in the additional confirmation and are simply looking for an early entry, they may prefer this less widely used entry signal based on the MACD histogram bars. This is because the histogram bars have a faster setting (9) than either the MACD line or the signal line, resulting in a timelier trigger – see MACD crossover vs MACD histogram below.

MACD crossover vs MACD histogram:

histogram buy sell signal

Using MACD Histograms as Buy/Sell Signals

The first point of analysis would be to pursue the MACD histogram as it moves away from the zero line (both positive or negative) - track it as its bars grow larger. The actual signal comes when the histogram no longer increases in height and produces a smaller bar. Once the histogram prints a smaller bar, traders look to enter in the direction of the histogram’s decline.

The buy signal on the left (blue) was created by five swelling red bars in a row followed by a fifth bar that closed smaller. Two bars later, the MACD line crosses above the signal line which is a traditional MACD signal. This later signal would have missed most of the move to the upside that the histogram signal would have caught.

The sell signal on the right (yellow) is a similar story. We saw fourteen bars growing consecutively until a contracted 15th bar was formed. This buy trade came several bars before the MACD/signal line cross.

EUR/USD MACD histogram buy sell signal:

MACD histogram buy sell signal
How to Use IG Client Sentiment in Your Trading
How to Use IG Client Sentiment in Your Trading
Recommended by Warren Venketas
Need confirmation to your MACD signal? Sentiment can help!
Get My Guide

Learn More About Technical Indicators

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.