MACD histogram
The MACD histogram plots the gap between the MACD line and its signal line, thereby measuring whether momentum is accelerating or fading.
The MACD histogram is simply computed as the MACD line minus the signal line. It is positive when the MACD sits above its signal, negative below, and reads zero at the exact moment of the crossover. Its height measures how fast momentum is changing: growing bars indicate accelerating momentum, shrinking bars fading momentum : often before the lines themselves cross.
How to read and use it
The histogram is mainly used as a leading indicator of the crossover: a histogram peak followed by shrinking bars frequently precedes a bearish line cross, and vice versa. Divergences are the other classic reading: if price prints a new high but the histogram tops out lower than at the previous peak, momentum is no longer keeping up. In Screener.Trading, the histogram is displayed with the MACD on charts and can feed your screener rules, for instance to spot a histogram flipping back above zero.
- Growing positive bars: bullish momentum accelerating.
- Shrinking positive bars: rally losing steam, possible bearish cross ahead.
- Histogram crossing zero: the MACD/signal crossover is effective.
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