The MACD has a reputation to be a trend indicator, yet it has an equal reputation to be lagging due to its slow responsive signal line. The improved signal line gives the STC its relevance as an early warning sign to detect currency trends. It does this by using the same exponential moving averages EMAs , but adds a cycle component to factor currency cycle trends. Since currency cycle trends move based on a certain amount of days, this is factored into the equation of the STC Indicator to give more accuracy and reliability than the MACD.
STC Indicator improved on this by incorporating a and period EMA with a cycle component used as the period signal line. Since we can factor cycle trends based on X amount of days, we can then know how far and how long a trend lasts in terms of potential pips to earn. In terms of indicators both old and new, the STC Indicator is quite original in its conception.
Never before has an indicator been developed using a cycle component. Most use some form of moving average , particularly EMAs, as a base because it's easier to calculate and it focuses on recent prices rather than a simple moving average 's long data set of closing prices. Learn more about stochastics in Stochastics: The trend in the modern day is to develop more accurate, reliable and early warning signal detectors to follow prices more accurately using the old models.
The invention of the computer made it able to capture speed, accuracy and reliability of prices more uniformly, because the computer eliminated the need to calculate long equations using pen and paper. So, any new modern indicator will always have a higher reliability factor when a signal is generated. However, as reliable as the STC Indicator may be, never will an indicator be perfect.
The reliability factor may be higher but slight problems exist because of the STC's ability to stay in overbought and oversold markets for extended periods. For this reason, the STC Indicator should be used for its intended purpose: Eventually another signal will generate.
The STC Indicator generates its buy signal when the signal line turns up from 25 to indicate a long or turns down from 75 to indicate a short. It served as an early warning of trend change on the far left with the long red candle.
A sell signal was generated at The next sell signal was generated at about These moves occurred ahead of the buy and sell signals generated by MACD. Indicator Issues Notice how many times the STC line resulted in a straight line to signal an overbought or oversold market. One certain aspect is that oversold markets will eventually become overbought and overbought markets will become oversold, especially when it comes to the currency cycle aspects of this indicator.
Yet that is not a signal generator. Overbought or oversold markets represented by a straight line can in many instances still represent points on the upside, as it did at the overbought mark at This is the small problem with the STC Indicator. The recommendation is to wait for the signal before jumping in. One can increase the cycle count signal line from 10 and adjust upwards to fit the exact market.
This would represent smaller market turns and a more accurate reading. Caution is advised not to increase the cycle count higher than 40, since that is the maximum currency count.
One can also adjust downward to generate many market turns, but they may not be accurate signals. For longer time framed charts such as the weekly, it is recommended to adjust the EMAs to 12 and 26 or 7 and 13, and allow the same amount of cycle counts at 20 as the signal line.
For shorter time frames, such as the minute chart, increase the EMAs to and , and allow the same cycle count. A personal recommendation is to allow the indicator to work as intended with the recommended settings, especially when it comes to cycle counts.
Better to adjust the EMAs rather than the cycle count trigger line if one has to adjust at all. Conclusion The inventor of the STC Indicator allowed the full knowledge of formulas and codes to be released in , so the trading public is now becoming aware of its use as an early warning trend signal.
I have personally used and profited from its use on many occasions, and I have personally used the recommended settings. The interesting aspect is that this indicator is forward-looking, and is considered a leading indicator. This means false signals are very rare if ever generated. Plus, signals are generated much faster than the old indicators, such as MACD. For another recommended indicator that works as intended, this is a good one.
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