What it is
MACD is built from three things:
- MACD line — 12-day EMA minus 26-day EMA. Positive when the short-term EMA is above the long-term one; negative when below.
- Signal line — 9-day EMA of the MACD line.
- Histogram — MACD line minus signal line.
What people watch
- Crossovers — when the MACD line crosses above the signal line, or vice versa. These crossings are often labeled "bullish" or "bearish" in textbook language.
- Distance from zero — how far the MACD line sits above or below zero tells you how separated the two underlying EMAs are.
- Divergence — when the price makes a new high but the MACD doesn't (or vice versa). Some chart-readers treat this as a momentum warning.
What it isn't
MACD is derived entirely from past price. It says nothing about fundamentals, earnings, or news. Like every chart indicator, it describes what already happened.