SchaffTrendCycle

Description

The Schaff Trend Cycle (STC) is a technical indicator developed by Doug Schaff as an improvement on cycle oscillators and the MACD. The main idea behind this oscillator is to combine the benefits of trend and cycle indicators and minimize their drawbacks such as lags or false signals. The main purpose of the STC is to identify or confirm price direction and market turning points.

The STC is calculated as a double smoothed stochastic of the MACD, which outputs an oscillator that moves between 0 and 100. In trending markets, the oscillator is expected to move up if the market is in the accelerating uptrend; accelerating downtrends are supposed to push the oscillator down. In sideways markets, the STC indicates oversold conditions when it reverses after falling below 25; overbought conditions, when it turns down from above 75.

Input Parameters

fast length The number of bars used to calculate the fast moving average in the MACD.
slow length The number of bars used to calculate the slow moving average in the MACD.
k period The number of bars used to calculate the FastK component of the stochastic.
d period The number of bars used to calculate the FastD component of the stochastic.
over bought Defines the overbought level.
over sold Defines the oversold level.
average type The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull.

Plots

STC The Schaff Trend Cycle oscillator.
OverBought The overbought level.
OverSold The oversold level.

Further Reading

 1. Schaff, Doug. "Releasing the Code to the Schaff Trend Cycle" (FXStreet, February 2008).

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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