“When using MACD, do we look at the Lines or Histogram?”
“We look at both lines and histogram when using the MACD, because they are both giving out useful information to help traders to analysis the market better.”
Alright, so what information they giving out?
Lines in MACD
The 2 lines in MACD tells traders whether price is heading upward or downward, and it gives out signals at when the price changes direction. Therefore, we can see these 2 lines are a directional indicator.
- Blue line above red line: Price is in an upward formation
- Blue line below red line: Price is in a downward formation
Histogram act as a complementary signal in the MACD which it tells traders the momemtum of the price movement, whether it is strengthening or weakening. Moreover, traders are able to have an idea of the price direction by identifying the colour of the histogram, which are:
- Green histogram: Price is in upward formation, the longer the green histogram the strong the upward movement is.
- Purple histogram: Price is in downward formation, the longer the purple histogram the strong the downward movement is.
Combining the lines and histogram in MACD will help you to get a better idea on the price direction and price momentum at the same time which will help you to make better decision when entering the market.
For more information about the MACD indicator, take a look at this videos here!
If you have any question, don’t feel shy to come and talk with me!