Stocks & Commodities V. 28:4 (98, 97): At The Close by Brian Twomey

At The Close by Brian Twomey

This indicator can be used with great reliability to catch moves in the currency markets.

Doug Schaff, president and founder of FX Strategy, created the Schaff trend cycle indicator in the 1990s. It is the product of more than 20 years of experience in technical analysis, trading the markets with an expertise in currencies and a masterful understanding of technical analysis and price functions in the markets. Who better to give this generation of traders an interesting, comprehensive, accurate, and brilliant indicator? Schaff divulged the details of his indicator back in 2008, so the public is only now becoming familiar with its functions and uses. In my limited time using this indicator, I’ve found it to be hugely intriguing, a fascination I hope to impart to other traders.

FASCINATION

What makes this indicator interesting is that it is a combination of moving average convergence/divergence (Macd) and fast stochastics with a cycle component and a smoother to capture market prices more comprehensively. It is a combination of leading and lagging indicators. The Macd is considered to be a leading indicator because it serves as an early warning to where prices will go. It follows prices with its 12- and 26-period exponential moving average (Ema) components and nine-day Ema signal line. In this capacity, it is a trend indicator. Yet it is a lagging indicator because it doesn’t always lead prices, is prone to false signals especially in fast-moving markets such as currencies, and also prone to whipsaw price action. So you have to adjust the settings to satisfy your price and market objectives.