Binary Options Indicator Schaff Trend Cycle

Main

Useful

Programs and indicators

Schaff Trend Cycle

The Schaff Trend Cycle binary options indicator was developed by renowned currency trader Doug Schaff in 1999 to improve trading based on the popular MACD oscillator. It has gained wide recognition in trading circles for its ability to provide accurate buy and sell signals, as well as timely warnings about trend changes.

The Schaff Trend Cycle is a great addition to traditional moving averages , adding cyclical analysis for a deeper understanding of market trends. You can download this free oscillator at the end of the review, but first, let's look at why the Schaff Trend Cycle binary options indicator has become so popular.

Content:

Characteristics
Installation
Overview and settings
Trading Rules for the Schaff Trend Cycle
Opening a Call Option
Opening a Put Option
Conclusion
Download Schaff Trend Cycle

schaff trend cycle chart

Characteristics of the Indicator for Binary Options Schaff Trend Cycle

Terminal: MetaTrader 4
Timeframe: M30
Expiration: 3 candles;
Option Types: Call/Put
Indicators: SchaffTrendCycle.ex4
Trading instruments: currency pairs , commodities, cryptocurrencies , stocks
Trading hours: 8:00 - 20:00 Moscow time
Recommended brokers: Quotex , Pocket Option , Alpari , Binarium

Installing the Schaff Trend Cycle Binary Options Indicator

The Schaff Trend Cycle indicator is installed as standard in the MetaTgader 4 platform. To do this, you need to add it to the root folder of the terminal by selecting “File” in MT4 and then “Open data directory”. In the opened directory, you need to go to the “MQL4” folder and then to “Indicators”, then move all the files there. Templates are installed in the same way, but are placed in the “templates” folder. You can read the installation instructions in more detail in our video:

Review and Settings of the Indicator for Binary Options Schaff Trend Cycle

The Schaff Trend Cycle (STC) binary options indicator helps traders take the first step in determining the direction of trading. The sooner we recognize the first signs of a new price impulse, the more profitable our decision to open a position in this direction will be in terms of the ratio of profitability and risk. One way to do this is to use a trend indicator that can identify trends at an early stage. Here, the compromise between the quality of the signals generated and the speed of their occurrence is very important.

This compromise is exactly what the STC binary options indicator provides, specially created to warn the trader about a change in trend earlier than the classic MACD. This oscillator is calculated based on the Moving Average Convergence/Divergence line, which represents the difference between two exponential moving averages, using a modified stochastic algorithm.

oscillator in schaff_trend_cycle

In the picture above, signals from STC arrive significantly earlier than from the standard MACD. For the sake of purity of the experiment, we chose the same calculation periods for these two indicators. The signal in this case is the intersection of the Schaff Trend Cycle oscillator levels 75 and 25, and for the Appel indicator, the intersection of the histogram and the signal line.

As we can see, STC copes well with defining the minimums and maximums of trend cycles. It is perfect for identifying price waves. The Schaff development is especially good at identifying cycles within a trend. With its help, you can determine the end of a correction and the resumption of price movement along a trend at early stages.

The settings for this tool are very simple. To work with it, you only need to set up three parameters:

MAShort – period of fast exponential moving average
MALong – period of slow exponential moving average
Cycle – correction factor

settings in schaff_trend_cycle

The Schaff trend cycle can take values in the range from 0 to 100. In this case, level 25 is considered the border of the purchase zone, and level 75 is the border of sales. Basic settings: (23, 50, 10).

While the basement oscillator values are below 25, sales dominate the market. As soon as it exceeds this mark, it is worth thinking about a trend reversal. At the same time, the indicator line above 75 indicates buyer activity, which comes to naught if it is broken from top to bottom. Keep in mind that these levels are not dogma, and they can change depending on the specific financial instrument and trading period.

By default, EMAs with a calculation period of 23 and 50 bars, respectively, are used. These values should be selected based on your own preferences, based on the moving averages you are used to. However, these parameters have proven themselves to be good for most instruments and trading periods. The general rule is the following: the larger the working timeframe, the shorter the calculation period of the moving averages should be used and vice versa.

For example, on a weekly chart, the values 12 and 26 (similar to MACD) or 8 and 13 (numbers from the Fibonacci series) have proven themselves to be good. At the same time, for short-term trading on M15, 115 and 240 can be used as the EMA period.

It is recommended to use half of the expected trading cycle for the “Cycle” coefficient. Before you substitute any value into this parameter field, it would be a good idea to understand what it is.

setting the cycle parameter in schaff_trend_cycle

According to the developer, the “trading cycle” is the number of bars that on average occurs from the moment of the beginning of the trend impulse (crossing of moving averages) to the first correction within one trend. On the slide above, this interval is highlighted by vertical dotted lines. The distance between them is 22 bars. Therefore, the optimal value of the “Cycle” coefficient for this instrument and time interval is 22 / 2 = 11.

In general, it is recommended to use the Schaff Trend Cycle in combination with other indicators and Price Action models, such as those implemented in the Precise Entry or Secret Grail strategies. In these, you will see successful options for combining STC with other market analysis methods to achieve consistent results.

The disadvantages of this tool include the lack of notifications, which makes working with it less comfortable.

Trading Rules for Binary Options Indicator Schaff Trend Cycle

The Schaff Trend Cycle binary options indicator is applicable to trading any financial instruments – from indices and metals to cryptocurrencies . However, we do not recommend using only its signals without confirming the trend with other indicators or methods. If you do not know how to correctly identify trends, we recommend that you read a special selection of articles on this topic on our website:

As an example, to determine the trend, we will use two exponential moving averages (EMA) with averaging periods of 23 and 50 bars. If the value of the “short” moving average is greater than the “long” one, we open only purchases; if the “short” one is less than the “long” one, we open only sales.

trading zones in schaff_trend_cycle

These rules will act as a filter and will not allow you to make trades against the main trend or during a period of wide flat, when the exchange rate dynamics of our currency pair are constantly changing to the opposite.

So, the rules for opening a Call option:

We are convinced of the presence of an upward trend by the position of the two EMAs relative to each other.
Trend Cycle Oscillator Crosses Level 15 From Bottom Up
At the opening of a new time interval we buy Call

Rules for opening a Put option:

We are convinced of the presence of a downward trend by the position of the two EMAs relative to each other.
Trend Cycle Oscillator Crosses Level 85 From Top to Bottom
At the opening of a new time interval we buy Put

The recommended expiration time is 3 candles. However, for a specific instrument, the position holding period should be selected based on the results of historical testing and the time frame used.

Opening a Call Option

EMA(23) value is greater than EMA(50)
STC oscillator crossed level 15 from bottom to top
At the opening of a new candle we buy Call

Opening a Put Option

EMA(23) value is less than EMA(50)
STC oscillator crossed level 85 from top to bottom
At the opening of a new candle we buy Put

Conclusion

Against the backdrop of endless fluctuations in financial markets, analysis tools are becoming a necessary component of successful trading. One of them is the Schaff Trend Cycle binary options indicator. It attracts the attention of traders with its unique ability to identify trends and generate accurate signals for opening positions.

The Schaff Trend Cycle binary options indicator is an attractive alternative to MACD, providing earlier buy and sell signals. The combination of Moving Average Convergence/Divergence and the stochastic oscillator in one indicator increases its reliability and efficiency. If you filter its signals using two moving averages, you can achieve an increase in the number of profitable trades.

Please test this indicator on a demo account and share your impressions in the comments. Your opinion is important to us. Do not forget to follow the rules of risk and capital management. We wish you all good luck in trading!