MACD is a trend following indicator, and is designed to identify trend changes. It's generally not recommended for use in ranging market conditions. Three types of trading signals are generated:

·         MACD line crossing the signal line.

·         MACD line crossing 0.

·         Divergence between price and histogram, or between MACD line and price.

The signal line crossing is the usual trading rule. The standard interpretation is to buy when the MACD crosses up through the signal line, or sell when it crosses down through the signal line. These crossings may occur too frequently, and other tests may have to be applied.

The histogram shows when a crossing occurs. When the MACD line crosses through zero on the histogram it is said that the MACD line has crossed the signal line. The histogram can also help visualizing when the two lines are coming together. Both may still be rising, but coming together, so a falling histogram suggests a crossover may be approaching.

A crossing of the MACD line up through zero is interpreted as bullish, or down through zero as bearish. These crossings are of course simply the original EMA(12) line crossing up or down through the slower EMA(26) line.

It is recommended to look at a MACD on a weekly scale before looking at a daily scale to avoid making short term trades against the direction of the intermediate trend.[1]