Schaff Trend Cycle (STC)

The STC (Schaff Trend Cycle) indicator is a momentum oscillator that combines elements of MACD and stochastic indicators to identify market cycles and potential trend reversals.

Key features of the STC indicator:

• Oscillates between 0 and 100, similar to a stochastic oscillator
  
• Values above 75 generally indicate overbought conditions
  
• Values below 25 generally indicate oversold conditions
  
• Signal line crossovers (above 75 or below 25) can suggest potential entry/exit points
  
• Faster and more responsive than traditional MACD
  
• Designed to filter out market noise and identify cyclical trends
  

Traders typically use the STC indicator to:

• Identify potential trend reversals
  
• Confirm existing trends
  
• Generate buy/sell signals when combined with other technical indicators
  
• Filter out false signals in choppy market conditions
  

This STC implementation includes multiple smoothing options that act as filters:

• None: Raw STC values without additional smoothing, which provides the most responsive but potentially noisier signals.
  
• EMA Smoothing: Applies a 3-period Exponential Moving Average to reduce noise while maintaining reasonable responsiveness (default).
  
• Sigmoid Smoothing: Transforms the STC values using a sigmoid (S-curve) function, creating more gradual transitions between signals and potentially reducing whipsaw trades.
  
• Digital (Schmitt Trigger) Smoothing: Creates a binary output (0 or 100) with built-in hysteresis to prevent rapid switching.
  
  The STC indicator uses dynamic color coding to visually represent momentum:
  
• Green: When the STC value is above its 5-period EMA, indicating positive momentum
  
• Red: When the STC value is below its 5-period EMA, indicating negative momentum
  The neutral zone (25-75) is highlighted with a light gray fill to clearly distinguish between normal and extreme readings.
  
  Alerts:
  Bullish Signal Alert:
  
• The STC has been falling
  
• It bottoms below the 25 level
  
• It begins to rise again
  This pattern helps confirm potential uptrend starts with higher reliability.
  
  Bearish Signal Alert:
  
• The STC has been rising
  
• It peaks above the 75 level
  
• It begins to decline
  This pattern helps identify potential downtrend starts.