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Schaff Trend Cycle Indicator
The Schaff Trend Cycle Indicator is a custom forex oscillator that combines MACD and Stochastic into one trading tool. Applying that formula results in reduced lag, less noise, faster reaction to trend changes. It simply provides reliable and early trading signals to forex traders. This indicator calculates two different methods to determine the trend direction changes — MACD and Smoothed Stochastic Oscillator. The readings of the indicator fluctuate between 0 and 100. The Schaff Trend Cycle was introduced in 2008 by Doug Schaff, who assumed that the currency trends accelerate and decelerate in cycles.
The Schaff Trend Cycle Indicator fits all kinds of timeframes and currency pairs. It is displayed in a separate window placed just below the main trading chart. The default settings can be modified directly from the input tab. Feel free to experiment with the settings and parameters to fit your personal preferences.
How does it work? How to apply in trading?
Trading Rules Explanation
The Schaff Trend Cycle Indicator is obviously an oscillator, so it indicates overbought and oversold states of the market. New forex traders can benefit from the trading signals provided by the Schaff Trend Cycle as they are easy to identify and follow. However, advanced forex traders can try the Schaff indicator in conjunction with some other forex technical analysis indicators. For example, a combination of an overbought/oversold oscillator with a trend-following indicator should give very profitable results.
Follow these steps for a long trade:
- The Schaff Trend Cycle oscillator reaches oversold area (below 25 level)
- Then oscillator line reverse and rose above 25 level
- Price swings higher from recent low swing
- Buy trade is triggered after the above conditions are met
- Signal is valid as long as Schaff Trend Cycle stays above 75 level
- Set stop loss a few pips below the last low point of the market
- Take profit or exit trade whenever the Schaff Trend Cycle leaves the overbought area or use your own preffered method of trade exit
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