Histogram – Definition

Cite this article as:"Histogram – Definition," in The Business Professor, updated December 3, 2019, last accessed August 14, 2020, https://thebusinessprofessor.com/lesson/histogram-definition/.


Histogram Definition

A histogram refers to a process of arranging data points based on their specific ranges and user value. It is a visual or graphical representation of statistical data or information. A histogram is often used in statistics and mathematics, it is similar to a bar graph but the bar in a histogram contains different ranges of data, displayed in different heights. It is a graph that contains many data points and groups them into ranges that can easily be interpreted by readers.

A Little More on What is a Histogram

A histogram uses rectangles pitched on a graph to display a specific data point or statistical information. The rectangles on the graph are otherwise called bars, these bars show how many data points or statistical information fall in each range. For example, is a census is done in a geographical location to categorize people that are schooled, unschooled, those that use the internet, among others, a histogram can be used to graphically display the range each data group belongs. In some histograms, both independent and dependent variables are used to represent statistical information, the independent variables may be presented on the vertical axis while the horizontal axis consists of the dependent variables.

The moving average convergence divergence (MACD) histogram is an important indicator in the investment market. Traders, analysts, and experts check the MACD histogram as a technical indicator of whether the market is bearish or bullish. This histogram reflects the difference between the MACD line and the signal line, while the MACD line is regarded as the blue line, the signal line is known as the red line.

The MACD line and the signal line are the two moving averages of the price of a security, the MACD histogram shows the interaction between these two averages. On a MACD histogram, when the MACD line is above the signal line, it is positive and when it is below the signal line, it is deemed negative.

Trading with the MACD Histogram

In the investment market, many traders use the MACD histogram to ake decisions pertaining to investments and trading while many traders overlook this histogram. Usually, traders track the bars on the MACD histogram to determine the appropriate time to trade by checking the movement of the bars from the zero line. The MACD histogram is a technical indicator that is helpful to traders in several ways, although it has certain weaknesses. Aside from the MACD histogram, there are other indicators that traders commonly use in the market to make trade decisions.

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