What is MACD ?
MACD is used as an indicator to trade stocks. Moving Average Convergence/Divergence, commonly referred to as MACD, pronounced macD, is an indicator used in technical analysis. It was invented in the 1960s as a means of showing the differences between both the fast and slow EMAs (Exponential Moving Average) of closing prices.
MACD = EMA[Fast ] of price - EMA[Slow], for Example EMA[12] - EMA[26].
In addition, MACD is also represented by signal line, which is an average of the MACD value. So, it would be something like, 9 period EMA for MACD.
How are the plotted ?
Generally, MACD is plotted as a histogram on the bottom of the chart. The signal line is plotted as a line along with MACD histogram.
How MACD is used ?
Generally, it is considered that when the MACD falls below the signal line it can be regarded as bearish and may well indicate a time to sell, whereas when the MACD rises above the signal line indicating a bullish trend which may indicate an upward trend in price
