What the Indicator Shows
MACD consists of two lines — the "MACD line," which is the difference between a short-term and a long-term exponential moving average, and the "signal line," a further smoothed version of the MACD line — plus a "histogram" that plots the difference between the two as a bar chart. It tends to reflect recent price movement more readily than a simple moving average.
How to Read It, and What to Watch Out For
Some view the MACD line crossing above the signal line as a sign that upward momentum is strengthening, and crossing below as a sign that it is weakening, but this is not an absolute signal. In particular, during range-bound markets with small price swings, crossovers can occur frequently and become harder to interpret, so it is common to check MACD alongside other indicators.