What is the fastest leading indicator?

investopedia.com - Schaff Trend: A Faster And More Accurate Indicator - Investopedia

How do I convert Bitcoin to cash without paying tax?

Can You Cash Out Bitcoins Tax-free in the U.S.? Some people can cash out Bitcoins tax-free in the U.S. Investors who do not exceed a $78,570 income...

Last updated Aug 29, 2019

Is it better to do parlay or single bet?

Regardless of your bankroll or risk tolerance, a single or straight bet is consistently the best way to wager on sporting events. Multi-team...

Last updated Aug 30, 2021

Make Your Bookie Cry And Pull The Hair By Generating $23,187

Promotion

What Is Schaff Trend Cycle?

The Schaff Trend Cycle (STC) is a charting indicator that is commonly used to identify market trends and provide buy and sell signals to traders. Developed in 1999 by noted currency trader Doug Schaff, STC is a type of oscillator and is based on the assumption that, regardless of time frame, currency trends accelerate and decelerate in cyclical patterns. Key Takeaways Schaff Trend Cycle is a charting indicator used to help spot buy and sell points in the forex market. Compared to the popular MACD indicator, STC will react faster to changing market conditions. A drawback to STC is that it can stay in overbought or oversold territory for long stretches of time.

How STC Works

Many traders are familiar with the moving average convergence/divergence (MACD) charting tool, which is an indicator that is used to forecast price action and is notorious for lagging due to its slow responsive signal line . By contrast, STC’s signal line enables it to detect trends sooner. In fact, it typically identifies up and downtrends long before MACD indicator. While STC is computed using the same exponential moving averages as MACD, it adds a novel cycle component to improve accuracy and reliability. While MACD is simply computed using a series of moving average, the cycle aspect of STC is based on time (e.g., number of days). It should also be noted that, although STC was developed primarily for fast currency markets, it may be effectively employed across all markets, just like MACD. It can be applied to intraday charts, such as five minutes or one-hour charts, as well as daily, weekly, or monthly time frames.

STC Isn't Perfect

While the STC indicator seems to boast higher reliability than MACD, it has some inherent flaws. Namely, it can linger in overbought and oversold territory for extended periods of time. For this reason, the indicator is most often used for its intended purpose of following the signal line up and down, and taking profits when the signal line hits the top or bottom. Let's see how it works. Consider the following hourly chart of the British pound and Japanese yen currency pair, GBP/JPY. While MACD generates its signal when the MACD line crosses with the signal line, the STC indicator generates its buy signal when the signal line turns up from 25 (to indicate a bullish reversal is happening and signaling that it is time to go long), or turns down from 75 (to indicate a downside reversal is unfolding and so it's time for a short sale).

How does the FBI contact you?

An official FBI special agent will never provide you with a badge number or telephone number to attempt to verify their identity without additional...

Last updated Apr 30, 2021

Why is 7 so special?

In the Bible, scholars claim that God created the world in six days and used the seventh day to rest. Because of this, the number seven is used to...

Last updated Mar 28, 2018

Promotion

Notice that the STC line generated a buy signal with the pair around 140.00 and then signaled that the market was overbought at 142.45—a 245-pip move. MACD did not generate a signal until the move was well underway. The next signal was a sell signal, generated at approximately 144.00, and lasted until 141.50—a 250-pip move. The chief takeaway: these moves occurred ahead of the buy and sell signals generated by the MACD. Also, notice how many times the STC line resulted in a straight line, signaling an overbought or oversold market. It’s a near-certainty that oversold markets will eventually become overbought markets, and vice versa, especially when it comes to the currency cycle aspects of this indicator.

The Bottom Line

The STC indicator is a forward-looking, leading indicator, that generates faster, more accurate signals than earlier indicators, such as the MACD because it considers both time (cycles) and moving averages. Like any chart indicator, the tool is best used with other forms of analysis and its performance will surely vary as market conditions change.

investopedia.com - Schaff Trend: A Faster And More Accurate Indicator - Investopedia