Thread: Schaff Trend Cycle – VertexFX Indicator

As the name suggests, the Schaff Trend Cycle is used to determine the two important characteristics of a trend - namely its strength, and its cycle. To calculate the indicator value, we first calculate the short term EMA and the longer term EMA. The different between the shorter EMA and longer EMA is also calculated. Then over a period of CYCLE bars, we calculate the highest and the lowest values of this difference between the shorter and longer MAs.
Finally, the Schaff Trend Cycle is calculated by first subtracting the current difference in the EMAs, and then dividing it by the different between the highest and lowest values of the difference in the EMAs over the CYCLE period. This value is then bounded between 0 and 100.
The idea behind this indicator is that the faster EMA responds quicker than the slower EMAs to the price movements.

BUY - Enter BUY when the indicator rises gradually from 0.
SELL - Enter SELL when the indicator falls gradually from 100.