Schaff Trend Cycle Indicator is a technical indicator for meta trader 4 platform that mainly developed to transform past data.
Schaff Trend Cycle Indicator:
Doug Schaff developed this indicator in 1999, As the name Schaff Trend Cycle Indicator indicate this indicator analyse trend cycle in a market. It helps to identify abnormality in trends and all the opportunities hidden in trends. It can predict trend movement as it is a combination of two well-known best indicators Stochastic oscillator and Moving Average Convergence Divergence (MACD).
Characteristics of Schaff Trend Cycle Indicator:
- Platform are: MT4
- Use charted graph for presentation.
- Use different colour lines
- Timeframe: short term few minutes, few hours, longer time is preferable.
- Use any pair of currency: (EUR/USD, GBP/USD, USD/JPY, USD/CAD, AUD/USD, NZD/USD, EUR/GBP, GBP/JPY, EUR/JPY, AUD/JPY, USD/CHF, XAU/USD) or any asset.
How Schaff Trend Cycle Indicator work?
Setting of Stochastic oscillator:
Most of traders prefer their own settings between 100 level but most common is 25 and 75 where if market cross level 25 it indicate bullish trend and if market cross below 75 level is assumed as bearish trend and downward trend. And above 75 is overbought zone and below 25 is oversold zone.
Trading signals Schaff Trend Cycle Indicator:
Buy: at the end of oversold trend when market start to move upward and cross the line above 25 so, this time to buy.
Sell: at the end of overbought trend when market start to move downward and cross the line below 75 so, this is time to sell.
Take Profits: when price cross the oversold area and indicator line is below 10 its time to take profit.
Stop Loss: set point above 100 level and when your favourable trade start to changes its direction
and trend break below the line or above the line you have set.
Few points to consider before entering trade.
The EMA has to be 100 and Stochastic oscillator lines must have crossed into the area of oversold levels. The Schaff indicator line has breached the oversold level and has changed direction. Prefer short time trade when entering short trade and long-time trade for buy trade. The values move 0 to 100 so, set points in between.
Advantages’ of Schaff Trend Cycle Indicator:
Schaff Trend Cycle Indicator is known as best technical indicator of all because it generates faster signals even before trend change its direction because it is a 2 in 1 indicator, it combines two best indicators to generate trend direction signals. Signals are much clearer than any indicator even MACD as you all know it is a combination of MACD and Stochastic oscillator, you will feel real time difference in the signals of both indicators and results are very clear. Well suited for longer day time period to avid market noises.
Some Flaws in Schaff Trend Cycle Indicator does not predict closing price of an asset and it take long sleep in over bought and oversold area. When the market is more volatile Schaff Trend Cycle Indicator generate false signals, which make it risky too. It is totally up to traders the way they use it.