Schaff Trend Cycle - Innovative Indicator [MT4, MT5]

Schaff Trend Cycle, i.e. a little-known but extremely innovative indicator of technical analysis. He was created by an economist and pioneer in creating technical tools for forex market - Doug Schaff. The STC is an oscillator that helps in determining the current trend and indicates its change, thus providing fairly precise buy and sell signals. According to the author, STC is a much better version of the indicator MACD. It is also known that it is based on the calculations of the Stochastic oscillator.  In this way (according to the creator) it was possible to achieve more stable and reliable results of the STC script. How is it really

Installations and operation

Schaff Trend Cycle is not a standard indicator available on MetaTrader 4/5 platforms. It should be downloaded separately (available on our forum here) and then move to the directory Indicators.

Be sure to read: How to add custom tools to MetaTrader 4

After restarting the platform we will find it in the tab Own.  The indicator is simple and legible, of course we can set the colors that suit us.

Schaff Trend Cycle - Reading signals

There are two main levels:

• 20 - when the indicator drops below the level of 20 or is close to it, we get buy signal.
• 80 - when the indicator is above level 80 or in its vicinity, we are dealing with sales signal.

NOTE: When the indicator changes into a straight line, and it only happens in its highest or lowest position, it means that the item is already heavily sold out or bought out. In both cases, a reversal of the trend can be expected.

When the trend is very strong, the STC will not tell us precisely the time when it may reverse. Then it is worth using additional help - MACD and Stochastic.

Red arrows show us the perfect moment to buy. MACD drew a "hill" and began to head up (this is demonstrated by the lower bar). At the same time, on Stochastic, being well below level 20, the averages crossed, which also suggests a change in price direction.

When the STC turns into a straight line, we can use it to close the position. This suggests an upcoming change of direction. This solution will work in medium and long-term strategies. Operating this method on an M1 or M5 chart will not work at all.

Conclusions and final assessment

Schaff Trend Cycle is an interesting indicator that can complement our set of investment tools. Please note that STC, like any other technical analysis tool, cannot provide accurate signals every time. Therefore, false indications will be an inseparable element that occurs in its use, especially at low intervals.

Advantages:

• For use on any instrument
• Effective for higher time intervals
• Easy to interpret and identify trends

Disadvantages:

• Not effective at low intervals
• It should always be set with additional indicators

Rating: 7/10