What it is:
A histogram is a visual display of information. It uses bars to show the frequency of an item of data in successive intervals.
How it works (Example):
A price by PBV chart) is a common horizontal histogram that shows a cumulative total of how many of a traded at a given price. The bars show the trading . In our sample histogram for Cisco Systems (Nasdaq: CSCO) (and in many charts of this nature), there is also a line indicating the price.chart (
The longer the horizontalbar on the histogram, the more that are trading at a given price.
Why it Matters:
In the finance world, histograms are very useful because they indicate where the action is. In our example,that the longest bar relates to the $27.50-$32.50 price range, meaning that the most trading in this occurs when the are trading between $27.50 and $32.50. Obviously, of trading also occurs in the $32.50-$37.50 range, but relatively few buyers and sellers want to trade when the is in the $42.50-$47.50 range or anywhere north of $70.
Accordingly, a histogram in this context could helptry to predict when the encounter and -- that is, when a reach its top and bottom price. This in turn helps decide when to buy and when to sell. It is important to , however, that histograms are just one of many charts that use.