Killer Patterns | PDF

An upward sloping MACD histogram shows that the bulls are becoming stronger. It follows that a downward sloping MACD histogram shows that the bears are getting stronger.

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The price trend (up or down) is likely to continue when the slope of the MACD histogram moves in the same direction as prices.

The price trend is put in jeopardy though ie there is more risk of it changing when the slope of the MACD histogram moves in the opposite direction to prices. You should trade in the direction of the slope of the MACD histogram.

The best buy signals are given when the MACD histogram is below the centre line and its slope then turns upwards showing that the bears are tired. And these signals are backed up and become extremely strong when there is a **bullish divergence.**

Go short as soon as the histogram stops getting higher and instead ticks down (moves down). Your initial stop should be placed above the last minor high in prices. If prices fall, this stop should then be moved down to lock in paper profits so that it's placed just above the highest price level for the last two bars.

This should be a trailing stop -- meaning that as the price drops, your stop follows the price and moves down, but if prices start to rise, your stop doesn't move.

Go long as soon as the histogram stops going lower and ticks upwards instead. Your initial stop should be placed below the last minor low in prices. If prices rise, this stop should then be moved up to lock in paper profits so that it is placed just below the lowest price level for the last two bars.

An upward sloping MACD histogram indicates that the shorter-term moving average is rising faster than the longer-term moving average, suggesting that buying pressure is increasing and the bulls are becoming stronger. Conversely, a downward sloping MACD histogram indicates that the shorter-term moving average is falling faster than the longer-term moving average, suggesting that selling pressure is increasing and the bears are becoming stronger.

Traders may use the MACD histogram to identify potential buy and sell signals. For example, when the MACD histogram crosses above the zero line, this may be a signal to enter a long position, as it suggests that bullish momentum is increasing. Similarly, when the MACD histogram crosses below the zero line, this may be a signal to enter a short position, as it suggests that bearish momentum is increasing.

It's important to note that while the MACD histogram can provide valuable insights into market trends and momentum, it should not be used in isolation. Traders should always consider other technical indicators, as well as fundamental and economic factors, before making trading decisions.