MACD (Moving Average Convergence/Divergence) was developed by Dr. Gerald Appel, President and founder of Signalert Corporation. The MACD consists of 3 components. The first is the MACD line itself, calculated by subtracting a short-term exponential moving average (First EMA period) from a more long-term EMA (Second Period EMA). The MACD line (the difference between the two EMA values) is plotted into the chart. Please note the values are all calculated based on market close prices.
The second component: the so-called “Signal Line” shows an exponential moving average (calculated based on the chosen number of “Signal EMA periods" defined) of the MACD line.
The third component is the Histogram, invented by Mr. Thomas Aspray, as a means to anticipate MACD crossovers. The histogram shows the difference between the MACD line and the Signal Line. If the MACD line is above the Signal Line, the histogram is positive, and the bars are drawn above the zero line. If the MACD line is below the Signal Line, the histogram is negative, and the bars are drawn below the zero line.
The default values used in FinanceChart is the 26 and 12 period EMA’s and a 9 period signal EMA period. Some traders use the Signal Line to trade on, when it crosses the MACD. But there are a number of different MACD interpretations (and different ways to calculate this indicator).