What is a Schaff Trend Cycle in Forex Trading

He based the Schaff Trend Cycle on the fact that, like prices, trends also demonstrate patterns of lows and highs in a repetitive manner. STC is a combination of the Moving Average Convergence/Divergence (MACD) and Slow Stochastics. The MACD that has been reputed as a trend indicator is widely known for its slow responsive signal line. The STC, with its improved signal line, provides traders with timely warning signs, enabling them to detect currency trends.

Forex Trading: Inputs Used by the Schaff Trend Cycle

The Schaff Trend Cycle uses the following inputs:

• Sh: Shorter-term Exponential Moving Average. Default: 23


• Lg: Longer-term Exponential Moving Average. Default: 50


• Cycle: Set at half the cycle length. Default: 10

Forex Trading: How the Schaff Trend Cycle Works

The Schaff Trend Cycle identifies high and low trends long before the MACD. The STC indicator uses the same exponential moving averages (EMAs) to detect trends, although it adds a cycle component to factor currency cycle trends. It must be noted that the movements in currency cycle trends take place on the basis of the particular number of days. This is factored in the STC Indicator’s equation to provide more accurate and reliable results than the MACD.

The MACD is merely a series of exponential moving averages with a signal line. It features a 12-period and 26-period EMA having a nine-period signal line. Since STC is an improved indicator than the MACD, it features a 23- and 50-period EMA, along with a cycle component, which is used as the 10-period signal line. As cycle trends can be factored by traders on the basis of a specific number of days, assessment of the longevity of a trend (when measured in potential pips to earn) can be made.

The Schaff Trend Cycle Indicator is not only better but also based on an original concept. Moreover, STC is the first ever indicator to be developed with the help of a cycle indicator. Most indicators make use of a type of moving average, usually EMAs, since they are simpler to calculate. Also, the focus of EMA is on current prices and not on a long-term data set of closing prices, as is the case with a simple moving average.