What Is Schaff Trend Cycle Indicator?

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The Schaff Trend Cycle (STC) indicator is a reliable system that was developed due to the growing need to have more accurate, reliable and early trend detectors in the market. Participants in the market are always searching for methods of accurately and swiftly identifying trends so as to reap huge returns.

In general, the STC indicator improves on the usage of the MACD (Moving Average Convergence Divergence) in terms of speed and accuracy. In addition, it also improves on the use of a modified slow stochastic oscillator indicator that validates support and resistance levels. The MACD indicator itself indicates trends and thus helps traders to identify potential trade opportunities. In addition, the MACD employs a very slow and delayed receptive signal line that further minimizes chances of error. However, when the MACD is combined with a slow stochastic, it enhances the quality of the signal significantly. Therefore, it allows traders to identify trends in the foreign exchange market much earlier than simply using only the MACD.

The working of the STC is very simple. Essentially, the STC identifies trends in the market much faster than the MACD. It achieves this through employing the same exponential moving averages (EMAs). However, it includes a cycle aspect to incorporate cycle trends in the market. It is important to note that cycle trends move according to a certain number of days. As such, this is incorporated into the equation of the STC indicator. This is why the STC indicator is considered to be more accurate and reliable than the MACD.

MACD is an indicator based on a series of exponential moving averages with a signal line. It has a 26-period exponential moving average and a 12-period exponential moving average. The STC indicator has enhanced the features of MACD through integrating a 23-period and a 50-period exponential moving average with a cycle component used as the 10-period signal line. Because of the fact that cycle trends can be factored based on X number of days, then the strength of trends can easily be measured.

The use of STC is increasingly becoming popular among traders. The beneficial characteristic of this indicator is that it is forward-looking. Furthermore, it is regarded as a leading indicator. This implies that inaccurate signals are not easily generated. Additionally, in contrast to the old indicators such as MACD, STC gives out signals at a much quicker rate. Therefore, if you are a lover of technical analysis, then STC indicator is the sure way to go.

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