MACD is the difference between a fast Exponential Moving Average (EMA) and a slow Exponential Moving Average and the fast Moving Average is continually converging towards or diverging away from the slow Moving Average. Signal line is a the Exponential Moving Average of the MACD, plotted to identify changes in trends and market sentiment.

The MACD study can be used to identify buy and sell signals. When the MACD crosses above the signal line, it may be time for the longs to enter the market, whereas when a cross below the signal line occurs, it may be time for the shorts to enter the market.

The MACD study can also be used as an oscillator, an indicator that fluctuates above and below a zero-line, to signal overbought and oversold conditions. When both lines are below zero, it is considered an oversold condition, signalling a buying opportunity, whereas if both lines are above zero, it is considered an overbought condition, signalling a selling opportunity.