# MACD Histogram Indicator for MT5

Trend following and momentum-based technical indicators are very useful for technical traders as they make it easier for traders to spot trend-based trading opportunities.

The MACD histogram is one of the most popular types of trend-following technical indicators that traders use. Let's see how we can use this indicator.

## What is MACD Histogram Indicator?

The MACD histogram is a version of the classic MACD indicator, or Moving Average Convergence and Divergence.

The MACD Histogram indicator is a momentum-based technical indicator that plots the trend and direction of momentum and reversal as an oscillator. It draws two lines, one moving faster than the other. These two lines oscillate freely around the center line, which is zero. It also draws a histogram bar based on two lines as well.

## How does the MACD Histogram indicator work?

The MACD Histogram indicator is based on an underlying exponential moving average (EMA) line pair. It calculates the difference between the faster moving average line and the slower moving average line. The difference is then plotted in its indicator window as the MACD line, which is the faster line.

Then the MACD line is averaged using the simple moving average (SMA) method. This is then displayed as a slower signal line.

The histogram bar is basically the difference between the MACD line and the signal line.

## How to use MACD Histogram indicator for MT5

The direction of the trend can be based on whether the two lines are generally positive or negative. Short-term trends can also be identified based on the interaction of the two lines. A bullish trend reversal is shown when the faster line crosses the slower line, while a bearish trend reversal is shown when the faster line crosses below the slower line.

The same can be applied with histogram bars as well. An uptrend reversal is shown when the histogram bars cross above zero, and a negative trend reversal is shown when the bars cross below zero.

Being an oscillator indicator, the MACD Histogram can also be used effectively to identify divergences. This is usually based on the MACD line.

The MACD Histogram indicator has four modifiable variables.

“Fast EMA Period” and “Slow EMA Period” refer to the number of periods on which the EMA line is based.

“Signal SMA period” refers to the number of periods on which the signal line is based.

“Applied Price” refers to the source of the price point for each candle.

How to use MACD Histogram indicator for MT5

Buy trade settings

When to enter?

Observe the bullish divergence on the MACD-Histogram. Place a buy order as soon as the MACD line crosses the signal line. Set the stop loss at the support below the entry candle.

When to come down?

Close the trade as soon as the MACD line crosses below the signal line.