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MACD - Moving Average Convergence Divergence

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MACD is the difference between a 26-day and 12-day Exponential Moving Average (EMA) of the closing price of the security. The most common usage is with a 12 period and a 26 period exponential moving averages. The difference between the two averages is plotted as an oscillator a histogram.

A 9 period exponential average of the difference is then plotted and displayed on the chart as a Signal line . This is used as a Signal for change of trends. A bullish signal occurs when the MACD moves above its 9 day EMA, and a bearish signal occurs when MACD moves below its 9 day EMA

The formula for the MACD is: 12 EMA - 26 EMA
The formula for the Signal is 9 EMA of MACD
The histogram is: MACD − Signal

The two averages from which the MACD is derived can be seen plotted on the chart below. Notice that the increasing/decreasing space between the two averages equals the rise and fall of the MACD.