A histogram of the difference between a 5 and a 34 period simple moving average of the bar midpoint, used to read momentum shifts.
Bill Williams's indicator is a simple moving average difference plotted as a histogram around zero, conceptually identical to macd but using midpoints instead of closes and fixed periods.
Traders read it three ways: zero-line crosses, the saucer pattern where the histogram changes colour twice without crossing zero, and the twin peaks divergence where a second histogram peak is lower than the first.
All three are the same lagging information presented visually, and the named patterns have no independent evidential support. It is best used as a quick visual gauge of whether short-term momentum agrees with the longer-term trend, not as a source of signals in its own right.
Original diagrams for the ideas on this page. Illustrative, not real market data.
MACD, signal line and histogram. The MACD line is the gap between a fast and a slow moving average, and the signal line is a smoothed copy of it. The bars show the distance between the two, and the circle marks where the faster line rises through the slower one.Divergence between price and RSI. RSI measures how one-sided recent price moves have been on a 0–100 scale. Here price sets a higher peak while RSI sets a lower one, so the second push carried less momentum than the first.
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