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The MACD-Histogram measures the difference between MACD and the 9-day EMA of MACD. This makes it an indicator of an indicator. MACD is a basic momentum indicator that measures the difference between two moving averages. Typically, MACD equals the 12-day EMA less the 26-day EMA. MACD turns positive when the 12-day EMA crosses above the 26-day EMA and turns negative when the 12-day crosses below the 26-day EMA. A 9-day EMA is applied to MACD to act as the signal line for upturns and downturns. MACD is moving higher when it breaks above its 9-day EMA and moving lower when it breaks below its 9-day EMA. The chart below shows the S&P 500 ETF (SPY) with the two exponential moving averages in the main window and MACD in the indicator window.
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As a moving average based indicator, positive/negative crossovers in MACD can lag turns in the underlying security. MACD-Histogram was created to speed up MACD. The MACD-Histogram measures the difference between MACD and its 9-day EMA. The histogram is positive when MACD is above its signal line and negative when MACD is below its signal line. Basically, MACD measures momentum, while the MACD-Histogram measures the momentum of momentum, which can be thought of as acceleration. The red arrows show the MACD-Histogram moving closer to the zero line, which means MACD is moving closer to its signal line. These moves can be used to anticipate a signal line crossover. The green arrows show MACD-Histogram moving away from the zero line, which means MACD is moving further from its signal line. These moves show that directional momentum is strengthening. You can read more on MACD in our ChartSchool article.
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