Schaff Trend Cycle

Characteristic: Trend Momentum

Schaff Trend Cycle (STC) identifies trend momentum. The STC is created by running the difference between two exponential moving averages (a MACD Line) through a proprietary stochastic algorithm. The resulting oscillator measures when trend is accelerating or decelerating, showing a cycle measure of trend.

The chart above shows an hourly Euro market with the Schaff Trend Cycle in the middle chart panel and a regular slow stochastic in the lower panel.

The STC tends to be smoother and suffers fewer whipsaws such as occurs at A in the regular stochastic. The STC also reaches the 25-line and 75-line more often, giving clearer ideas of when to enter and exit positions.

When the Schaff Trend Cycle is falling, trend momentum is falling and prices tend to stabilize or follow the trend cycle lower. When the STC is rising, trend momentum is rising and prices tend to stabilize or follow the cycle higher.

Dotted buy and sell lines are drawn at 25 and 75 in the STC chart panel. The indicator rising above the buy line can be used to confirm trend cycle lows. The indicator falling below the sell line can be used to confirm trend cycle peaks.

A powerful usage is to combine the STC with a Trend Direction indicator to identify both trend momentum and direction. Then consider trades when trend momentum and direction are in harmony.

The 4-hour British Pound chart above includes the STC and FXS-Trailing Stop. If the STC is rising or flat above 90, consider long trades if Trailing Stop is blue or light blue and rising. If STC is falling or flat below 10, consider short trades if Trailing Stop is red or magenta and falling.