Moving Average Convergence Divergence
Abbreviation
MACD
Moving Average Convergence Divergence is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price. Traders may buy the security when the MACD crosses above its signal line and sell—or short—the security when the MACD crosses below the signal line. MACD indicators can be interpreted in several ways, but the more common methods are crossovers, divergences, and rapid rises/falls.
The MACD is calculated by subtracting the 26-period Exponential Moving Average (EMA) from the 12-period EMA.
The result of that calculation is the MACD line. A nine-day EMA of the macd called the "signal line," is then plotted on top of the MACD line, which can function as a trigger for buy and sell signals.