Schaff Trend Cycle or STC is an interesting indicator because it looks easy to use, and it actually is. It can look like the RSI indicator because it has one line that moves in and out of zones, but it is more like the MACD indicator, and maybe a faster one at giving entry signals. On the TradingView platform, the Schaff Trend Cycle indicator looks like this. It will come with 1 signal line, that will move between the values 0 and 100. But unlike a RSI or similar indicator, the signal line in the Schaff Trend Cycle indicator, mostly stays flat after entering the overbought and oversold zones. Most traders consider the 75 and above area as overbought, and the 25 and below area as oversold. You are probably familiar with the MACD indicator. Check out the MACD video on this channel if you have not heard about it. It is one of the useful indicators you can have on a trading chart. It gives great entry signals and gives a lot of information about the momentum of the trend. But the reason why some traders like Schaff Trend Cycle more, is because it can detect trends faster. We will find out if the faster signals are a good thing or not soon after testing it 100 times in this video.

 

When the Schaff Trend Cycle is below 25, price is considered to be oversold. When this happens, we should look for long trading opportunities. Since 25 and below is the oversold area, the buy entry signal is when the signal line crosses above 25.

Similarly, when the Schaff Trend Cycle is above 75, price is considered as overbought. When this happens, we should look for short trading opportunities. Since 75 and above is the overbought area, the sell entry signal is when the signal line crosses below 75.

But the market is in a range most of the time, and if you take every single entry signal given by the Schaff Trend Cycle, you will probably lose money. When the price moves in an uptrend, you don’t want to take short entry signals given by the Schaff Trend Cycle. And when the price is moving in a downward direction, you don’t want to take long entry signals given by the Schaff Trend Cycle.

 

So to make the Schaff Trend Cycle even better, we will use the one simple but most useful thing we use on the Trading Rush Channel, the 200 period exponential moving average. So in the modified Schaff Trend Cycle Trading Strategy, if the price is above the 200 period moving average, the long entry signal is when the signal line of the Schaff Trend Cycle indicator crosses above 25. In the long setup, set the stop loss below the pullback of the trend. And if the price is below the 200 period moving average, the short entry signal is when the signal line of the Schaff Trend Cycle indicator is crossing below 75. In the short setup, set the stop loss above the pullback of the trend.

 

In this example, we can say price is in an uptrend because it is staying above the moving average. So we will only look for long entry signals. Here, Schaff Trend Cycle gave a buy signal. So entry is at the closing price of the entry candle, and stoploss is below the pullback.

Here, we will look for short entry signals because price is in a downtrend. Schaff Trend Cycle gave a sell signal. So entry is at the closing price of the entry candle, and stoploss goes above the pullback of the trend.

 

But to see if the Schaff Trend Cycle works in the long term or not, and to find its win rate, I tested the Schaff Trend Cycle trading strategy 100 times, and here’s what happened.

Number 1. There is one thing I really liked about this indicator while testing, was how simple and easy to use it was. Finding entry signals on the Schaff Trend Cycle is so easy that even your dog can make money with it. This is one of the best indicators for beginner traders, because the indicator is not a mess like the fractal indicator or scary like the Ichimoku Indicator. The Ichimoku indicator is actually very useful if you know how to use it. You can watch the Ichimoku Trading Strategy video to learn more about it, and to see how it gave a good win rate.

Number 2. When it comes to entry signals, the Schaff Trend Cycle indicator gives some good entry signals. While taking 100 trades with it, I noticed that it gives entry signals similar, or if not better than the MACD indicator. So the thing about it being faster than the MACD indicator is somewhat true, but hold that thought.

Number 3. Schaff Trend Cycle was an interesting indicator to test, because it gave more entry signals where previous indicators I have tested on the Trading Rush Channel didn’t. Strategies are tested on almost the same market structure, and where the indicators I tested in the previous videos only gave 1 or 2 signals, Schaff Trend Cycle gave a lot more. This made the profit graph in the Trading Rush App to go up. But.

Number 4. More signals in a shorter time period led to false signals. And after giving multiple winning trades in a row, the Schaff Trend Cycle indicator also gave multiple losing trades in a row. Furthermore.

Number 5. The Schaff Trend Cycle indicator gave a lot more false signals in a range market. Now this is obvious, because almost all trend following strategies will give false entry signals in a range. But some like the MACD strategy don’t. The MACD strategy we have discussed on the Trading Rush Channel, doesn’t give a lot of false signals in a range like the Schaff Trend Cycle strategy, because the MACD strategy has a zero line rule. If you don’t know what I’m talking about, watch the MACD video on this channel to learn more.

Number 6. One thing that is not good about this indicator, is that it gives a lot of false signals in slow trends. Remember how I said it gives more good entry signals where previous indicators didn’t. Well, it also gives more false entry signals where previous indicators didn’t.

 

So after testing the Schaff Trend Cycle trading strategy 100 times, I got an approximate win rate of 50 percent with a reward risk ratio of 1.5 to 1. A 50 percent approximate win rate is not bad for a strategy with reward risk ratio higher than 1. In the Official Trading Rush App, the Schaff Trend Cycle trading strategy made a profit. It made a profit of 2500, and had the same winners and losers in a row, just like the total number of trades won and lost. The profit graph in the Trading Rush App also looks good and is going up. Overall, the Schaff Trend Cycle indicator managed to make money. Maybe not as much as some other Trading Strategies we have seen on this channel, but money is still money.