The histogram is plotting a fast trend of candle lengths, positive or negative.
It is an average of open-close cross using the triple-ema ( ) weighted against higher timeframes.
The calculation is similar to ( KST ), only using open-close (candle length).
- Histogram below the centerline means candles are mostly down candles.
- Histogram often stays below centerline for 4-5 down spikes, then it makes its way back up through.
- Before each downtrend starts, there are these spikes (highlighted in yellow).
- In an uptrend, the last spike up appears to be the highest. Count them.
- In a downtrend, the first spike up is probably the highest.
- Bottoms will also show up the same way.
- Confirm using other indicators and price history.
Another average of the histogram produces a line that changes color from lime to grape.
- When the line is lime, and the price is not going up much (divergence), it indicates resistance.
- Conversely, when the line is grape, and the price is not going down much, it's a signal of support.
- A break or bounce off of support or resistance tends to follow the current longer-term trend, up or down.
- The line color does not mean the price will go up or down. It merely shows the candle length trend.
- Trends in candle length do seem to reveal or serve as a reminder of potential trend direction changes.
- During a flat or ranging trend, the line and price track each other well.
- During steep trends, up or down, the signals are not as reliable, but could be useful to spot weakness.
As always, not investment advice. Do your own due diligence before placing a trade.