Using the Schaff Trend Cycle for Trend Signals

Summary

The Schaff Trend Cycle is described as a bounded oscillator that combines a MACD line with two successive stochastic calculations. Its design aims to track cyclical acceleration and deceleration in currency trends while reducing choppiness during trends and responding quickly to changes. The indicator ranges from zero to one hundred, with twenty-five and seventy-five serving as trigger levels. Its main settings control the faster and slower moving averages used for MACD and the cycle length; alerts and chart arrows are optional.

A basic trading interpretation is to buy when the oscillator rises through the lower trigger and sell when it falls through the upper trigger. A further filter requires the bar after the trigger to close beyond the trigger bar’s high for a buy, or below its low for a sell. The document explains the indicator and signal rules but provides no backtest, evidence of profitability, stop placement, or position-sizing guidance. The rules therefore describe a signal approach rather than a complete evaluated trading system.

Key ideas

• The Schaff Trend Cycle combines a MACD calculation with two stochastic calculations.
• The oscillator ranges from zero to one hundred and uses twenty-five and seventy-five as trigger levels.
• A basic buy signal occurs when the oscillator rises above the lower trigger, while a sell signal occurs when it falls below the upper trigger.
• A follow-through filter checks whether the next bar closes beyond the trigger bar's high or low.
• The document gives no performance evaluation or complete trade-management rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.