25 December 2010

Schaff's Trend Cycle - Amibroker

The Schaff Trend Cycle Indicator (STC) by Dough Schaff, was developed to improve upon the speed and accuracy of the MACD indicator when it comes to identifying trends. It uses a MACD Line (the difference between two exponential moving averages) through a reworked stochastic algorithm.

What we get is a faster cycle identifier - an great aid in identifying trend changes and finding faster entries and exits.

Schaff Trend Cycle (STC) oscillates in between 0 and 100 scale.
The 25 level is called a Buy level, the 75 - a Sell level.
The default settings for STC are (10, 23, 50).

Buy Entry:
1. While indicator stays below the 25 - the downtrend is in progress.
2. Once it crosses up above the 25 level - it's the first warning of a changing trend: place a pending Buy order above the corresponding candle on a chart.
3. Wait for the Buy order to be filled. If the order is not filled, and the price continues lower - not a problem. Keep the pending order further while observing Schaff Trend Cycle behavior and new signals.

Opposite true for Sell entries, where the indicator has to cross the 75 level down to send a signal about a trend change setup.

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