A technical indicator that attempts to identify the direction of a trend as well as a trend’s cyclical tops and bottoms.
Overview
The Schaff Trend Cycle was developed by Doug Schaff in the 1990′s. The indicator is based on the fact that trends, like price, exhibit repeating high and low patterns (cycles). A modified MACD line run through a modified stochastic algorithm smoothed with Wilders’ method to calculate the final STC indicator.
The STC on the EUR/CAD daily Chart on 3/30/2011
Source: VT Trader
Interpretation
The Schaff Trend Cycle indicator uses components:
1) Shorter-term Exponential Moving Average.
2) Longer-term Exponential Moving Average.
3) Cycle: Set at half the cycle length.
The Schaff Trend Cycle helps to identify the direction of the trend cycle and tops and bottoms within a trend cycle.
When the STC is declining, the trend cycle is falling and prices tend to stabilize or follow the cycle down. When the STC is rising, the trend cycle is rising and prices tend to stabilize or follow the cycle higher.
