What Is a Histogram?

A histogram graphically represents data points organized into user-specified ranges. The histogram condenses a data series into an easily interpreted visual by taking many data points and grouping them into logical ranges or bins similar in appearance to a bar graph.

How Histograms Work

Histograms are commonly used in 澳洲幸运5官方开奖结果体彩网:statistics to demonstrate how many of a certain type of variable occur within a specific range. A census focused on the 澳洲幸运5官方开奖结果体彩网:demography of a town may use a histogram to show how many people are between the ages of zero to 10, 11 to 20, 21 to 30, 31 to 40, 41 to 50, 51 to 60, 61 to 70, and 71 to 8🌠0.

This histogram example would look similar to the chart below. Let's say the numerals along the vertical access represent thousands of people. You can start with the horizontal axis to read this histogram example. Beginning on the left, you'll see that there are approximately 500 people in the town who are from less than one year old to 10 years old. Four thousand people in town are 11 to 20 years old, and so on.

Histograms can be customized in ⛦several ways by analysts. They can change the interval between buckets. There are eight buckets 🔥in our example with an interval of 10. This could be changed to four buckets with an interval of 20.

Another way to customize a histogram is to redefine the y-axis. The most basic label used is the 澳洲幸运5官方开奖结果体彩网:frequency of occ♒urrences observed in the data but one could use percentage of total or density instead.

Histograms vs. Bar Charts

Both histograms and bar charts provide a visual display using columns and people often use th👍e terms interch𒈔angeably.

A histogram technically represents the frequency distribution of variables in a data set, however. A bar graph typically rep🍌resents a graphical comparison of discrete or🍨 categorical variables.

How to Make a Histogram

You can make a histogram in Microsoft Excel using the Histogram tool associated with the Statistical icon.

Your other option is to do it by hand:

• Start with the frequency rate of the data for each timespan.
• Compile this information in a table. Each interval should be the same length.
• The frequencies should appear on the vertical axis.
• The intervals should appear on the horizontal axis.
• Draw a line over each interval based on its frequency.
  

Histogram Example: The MACD Histogram   

Technical traders may be familiar with the 澳洲幸运5官方开奖结果体彩网:moving average convergence div𝓰ergence (MACD) histogram. It's a popular 澳洲幸运5官方开奖结果体彩网:technical indicator that illustrates the difference between the Mᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚACD line and the signal line.

The MACD histogram graphically represents the difference if there's a $5 gap between the two lines. The MACD histogram is plotted on a chart to make it easy for traders to determine a specific security’s momentum.

A histogram bar is positive when the MACD line is above the 澳洲幸运5官方开奖结果体彩网:signal line. It's negative when the MACD line is below the signal line. An increasing 澳洲幸运5官方开奖结果体彩网:MACD histogram indica𒉰tes an increase in upward momentum. A decreasing h𓂃istogram is used to signal downward momentum.

Trading With the MACD Histogram

A weakness of using only the MACD line and the signal line is the lagging nature of the s🐓ignal given.

The trading signal lags the price when the MACD line crosses over the signal line. They don't cross until a price move has already occurred because the two lines are 澳洲幸运5官方开奖结果体彩网:moving averages so traderꦰs forego a portion of ♚an initial move.

Traders can track the length of the histogram bars as they move away from the zero line. They may feel that the histogram is generating a trading signal when a bar is sho🏅rter in length than the preceding bar. Traders might open a position in the direction of the histogram’s decl𒉰ine when the smaller histogram bar completes.

Other technical indicators should be used in conjunction with the MACD histogram to increase the signal’s reliability. Traders can place a 澳洲幸运5官方开奖结果体彩网:stop-loss order to close out the trade 🥂if the security’s price doesn't move as anticipated.

The Bottom Line

A histogram is a graphical representation and organization of numerous data points. It can be organized to identify ranges that an individual or company needs. Technical analysts and traders can use the MACD histogram to detect changes in trading momentum. A histogram can also benefit a company's or organization's processes of decision-making in various departments.

You can make a histogram in Microsoft Excel using the Histogram tool if you'd like to try it out.

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