Adaptive, Zero lag Schaff Trend Cycle [Loxx]TASC's March 2008 edition Traders' Tips includes an article by John Ehlers titled "Measuring Cycle Periods," and describes the use of bandpass filters to estimate the length, in bars, of the currently dominant price cycle.
What are Dominant Cycles and Why should we use them?
Even the most casual chart reader will be able to spot times when the market is cycling and other times when longer-term trends are in play. Cycling markets are ideal for swing trading however attempting to “trade the swing” in a trending market can be a recipe for disaster. Similarly, applying trend trading techniques during a cycling market can equally wreak havoc in your account. Cycle or trend modes can readily be identified in hindsight. But it would be useful to have an objective scientific approach to guide you as to the current market mode.
There are a number of tools already available to differentiate between cycle and trend modes. For example, measuring the trend slope over the cycle period to the amplitude of the cyclic swing is one possibility.
We begin by thinking of cycle mode in terms of frequency or its inverse, periodicity. Since the markets are fractal ; daily, weekly, and intraday charts are pretty much indistinguishable when time scales are removed. Thus it is useful to think of the cycle period in terms of its bar count. For example, a 20 bar cycle using daily data corresponds to a cycle period of approximately one month.
When viewed as a waveform, slow-varying price trends constitute the waveform's low frequency components and day-to-day fluctuations (noise) constitute the high frequency components. The objective in cycle mode is to filter out the unwanted components--both low frequency trends and the high frequency noise--and retain only the range of frequencies over the desired swing period. A filter for doing this is called a bandpass filter and the range of frequencies passed is the filter's bandwidth.
Indicator Features
-Zero lag or Regular Schaff Trend Cycle calculation
- Fixed or Band-pass Dominant Cycle for Schaff Trend Cycle MA period inputs
-10 different moving average options for Zero lag calculations
-Separate Band-pass Dominant Cycle calculations for both Schaff Trend Cycle and MA calculations
- Slow-to-Fast Band-pass Dominant Cycle input to tweak the ratio of Schaff Trend Cycle MA input periods as they relate to each other
Schaff
Schaff Trend Cycle [ChuckBanger]The Schaff Trend Cycle is a method, developed by Doug Schaff and based on the concept that trends also have repeating high and low patterns, or cycles. This is a modified MACD line, run through a modified stochastic algorithm and smoothed with Wilders’ smoothing in order to estimate the final Schaff Trend Cycle (STC) indicator. Its purpose is to identify the direction, in which a trend cycle is moving and possible peaks and bottoms within this cycle.
If this is interesting you should also take a look at MACD Leader:
For more info about Schaff Trend Cycle Indicator:
www.investopedia.com
Schaff Trend CycleThis indicator was originally developed by Doug Schaff in the 1990s (published in 2008).
CCI Cycle (Modified Schaff Trend Cycle)This is a modified Schaff Trend Cycle (STC), which is designed to provide quicker entries and exits.
I've been a huge fan of the STC for a long time, but being based on the MACD means its signals often lag by a bar or two (especially in fast moving markets). All I've done here is take the base STC script (all credit to user @LazyBear), and change the source to a modified CCI.
The CCI Cycle provides more timely entries and exits, often by 1-2 bars. The flip side of the increased responsiveness is a prevalence for more false signals (a perfect example is the 17th August on the above chart). It's the nature of the beast! Still, I've been using this for a few months now and it's (in my opinion) an upgrade on the standard STC.
As always, you will need to pair this with another indicator or method of technical analysis to provide a trade bias, as the CCI Cycle (and STC) aren't designed to trade every signal. In my experience, either divergence identification, or using one or more moving averages works particularly well.
The indicator is also MTF capable, so you can get some interesting results from that.
Any queries let me know.
DD
