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Technical Indicators

Fri, Jun 6th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Schaff Trend Cycle

Indicator Type: Standalone - Interactive Charts Only

The Schaff Trend Cycle Indicator (STC) is a charting or technical indicator that allows investors to predict the market trend. Since it identifies the current and the possible future trends, investors can use the data provided by the Schaff Trend Cycle indicator for ideal buy and sell signals.

The idea behind the Schaff Trend Cycle indicator is the assumption that market trends increase or decrease in cyclical patterns, irrespective of the time frame. The Schaff Trend Cycle indicator is a combination of the moving average convergence/divergence (MACD) and the Stochastic.

MACD is referred to as the king of technical indicators since it encompasses moving averages and oscillators. MACD identifies the overbought and oversold zones in the chart and recognizes the right entry and exit levels. The Stochastics give indications of when a stock is overbought and when it is oversold. The stochastic identifies the %K line and the %D line and uses crossover to identify greater conviction and precision oversold levels.

How does Schaff Trend Cycle work?

The Schaff Trend Cycle has been one of the most vital tools in the toolkit of investors to predict the market trend and find the best entry and exit points. Although the credit goes to the impeccable process used by the Schaff Trend Cycle, the wide use of the indicator is also because of the flaws of the moving average convergence/divergence (MACD).

The MACD also does the same; identifies market trends. However, it lags immensely due to its signal line being responsive yet slow. On the other hand, the Schaff Trend Cycle indicator’s signal line is far more responsive and quicker in identifying the uptrends and downtrends.

Similar to MACD, the Schaff Trend Cycle is also calculated based on the exponential moving averages. Also known as exponentially weighted moving average, it places higher weightage on the most recent data points. EMAs are essentially used for analysis and as a trading indicator in the stock market. Slopes in the EMA charts signal the uptrend or downtrend of a stock. However, the Schaff Trend Cycle is considered more accurate and reliable as it adds a novel cycle component that is based on the time frame (number of days).

The Schaff Trend Cycle indicator is one of the most effective ways to let investors know about the market trend, overbought and oversold conditions, buying and selling positions, and ideal entry and exit points. The Schaff Trend Cycle indicator uses two thresholds of 25 and 75. If the Schaff Trend Cycle indicator crosses the first threshold of 25, it generally indicates that the market is in an uptrend.

However, if the Schaff Trend Cycle indicator has breached the 75 level line, it generally indicates the strengthening of the trend in either of the two directions (high or low). Furthermore, when the Schaff Trend Cycle indicator’s straight line is above 75, it is a signal for an overbought condition. On the other hand, if the straight line is below 25, it signals oversold stocks.

Final Words

The Schaff Trend Cycle indicator was first developed for predicting trends in the currency market. However, with its reliability and accuracy, the Schaff Trend Cycle is widely used by investors and traders across tradable financial securities. Although it is one of the best and most reliable indicators, investors must use it with caution as it can get stuck between the overbought and oversold territory for a long time. If added with the data provided by other technical indicators, the Schaff Trend Cycle can prove to be an effective contributing factor in making an ideal investing strategy.

Formula:

First of all, the 23-period and the 50-period EMA and the MACD values are calculated:

EMA1 = EMA (Close, Short Length) EMA2 = EMA (Close, Long Length)
MACD = EMA1 – EMA2

Secondly, the 10-period Stochastic from the MACD values is calculated:

%K (MACD) = %KV (MACD, 10) %D (MACD) = %DV (MACD, 10)
Schaff = 100 x (MACD – %K (MACD)) / (%D (MACD) – %K (MACD))

Sample Chart:

Schaff Trend Cycle

Default Parameters:

  • PeiordShort (23)
  • PeriodLong (50)
  • PeriodStoch1 (10)
  • PeriodStocj2 (3)
  • Smoothing (EMA) - valid options are MA, EMA, SMA
  • Lower Level (25)
    • - below this line indicates oversold
  • Upper Level (75)
    • - above this line indicates overbought

Source: https://www.indiainfoline.com/

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