How many data cells should be used in a histogram according to best practices?

Using the square root of the number of observations to determine the number of data cells (or bins) in a histogram is based on a principle that helps ensure an effective representation of the distribution of data. This approach balances the need for sufficient detail in the histogram while reducing the noise that might occur with too many or too few bins.

When the number of bins equals the square root of the number of observations, it allows for a reasonable amount of granularity without overcomplicating the visual representation. This method is particularly useful because it adapts to datasets of varying sizes, providing a guideline that helps maintain clarity and focus on the underlying patterns within the data.

In contrast, using too few bins may oversimplify the data and hide important trends, while using too many bins can result in a fragmented view that can misrepresent the data's actual distribution. Therefore, relying on the square root gives a practical, scalable approach to creating histograms that accurately reflect statistical distributions.