Let’s compare the popular bar chart and one of its indicators with the little known and scarcely used Renko charting style.  Dr. Elder’s MACD Histogram has been randomly chosen for this study.  He brought it up to stardom status in 1993 when he made it the primary component of his Triple Screen trading system.  Since then, it became a useful independent market analysis tool: the MACD Histogram alone can trade any security without assistance from other indicators, which is a positive.

More abrupt slopes occur on the left hand side at the start of MACD than at the exit on the right hand side.  This is because prices erupt first and rest second.

Single area MACDs at 1, 3, 5, 6, 11, 12, 14 and 15 detect minor or major price reversals, depending on the depth or height of the histogram.  All of them are what may be called ‘fast’ single areas.  As for multiple areas MACDs like the ones at 2, 4, 7 and 9, they exist because of the presence of price congestions.

MACD Histogram has so many aspects that interpreting it can be difficult at times. 

+MACD/–MACD series come in two forms: single area followed by a single area like a question and answer, or single area followed by a multiple area like a question answered with another question.  Labels 5-6, 11-12 and 13-15 are straightforward affairs, while the other occurrences are surprises; the most notable ones can be seen at 7-8 and 9-10.  At the arrow after 7 and after 9, the price was expected to continue moving in the direction of the fresh slope but no, the market decided otherwise.  Dr. Elder compares the -MACD upward slope to springtime and the +MACD upward slope to the summer season.  In similar fashion, he likens the downward slope of the +MACD to autumn and the downward slope of the –MACD to wintertime.  On occasion, the price in ‘autumn’ goes higher instead of declining directly to ‘winter’ levels.  He calls this ‘Indian summer’, a phenomenon when a sudden heat wave hits late in autumn (at 10).

Sometimes the price in ‘springtime’ drops lower instead of advancing directly to ‘summer’ levels.  This he calls a late cold spell in spring (at 8).

Another distinct feature of the MACD Histogram is the length of its component Moving Averages.  Traders work with Moving Averages set at standard periods because adjusting them to market cycles is an impossible task.  Enforcing a fixed length indicator to ever-changing market cycles, although it resembles talking to an Albanian in Chinese, is a compromise traders came to live with.

The discussion on the MACD Histogram cannot be ended without mentioning the incidents this indicator is famous for: convergences or divergences between itself and the price.  Both +MACD and –MACD confirm the market trend when the change in their value is in tune with the price creating a price/indicator convergence, or refute it when the change in their value is diametrically opposite, therefore creating a price/indicator divergence.