Cyclic fluctuations are something which happens quite often in the currency exchange market. Previous calculations on such cycles were done on macroeconomic indicators such as production volume and Gross Domestic Product. However as the venture got popular, this field got popular, traders got accessibility to some really good Forex cycle indicator in MT4/MT5.
A great option as per experts!
MetaTrader4 is a platform which presents plenty of cycle indicator options to traders. But not all of them are good in functionality and efficiency. The trick is to find one which presents correct price fluctuations and market expectations with fewer errors as possible.
Take a look at some good options for your trading tasks.
Schaff Trend Cycle Indicator for MT4:
STC is one of the popular cycle indicators Forex, which combines Moving Average Convergence and Divergence MACD with Stochastic.
This is compatible with the MT4 platform and detects upward and downward trend prior to MACD. It carries the process off using EMA (Exponential Moving Average) but by adding a cycle component to take into account the currency cycle trend.
MACD consists of a 12 and 26 EMA on a single EMA line and STC cycle indicator improves this by including a 23 day and a 50 period EMA.
The cycle component it brings into is a 10 period signal line. As speculations are done on cycle trends taking x number of days, traders get a clear insight on the distance and longevity of the previous trend with the potential pip earnings.
Explaining this technical analysis with an example:
Take the granddaddy of all currency pairs - GBP/USD. On your trading chart, you get a signal when the MACD signal line surpasses this threshold.
The 2 points of consideration for this Forex cycle indicator are 25 and 75.
• When the signal hits the 25 mark, it triggers off a buy signal. This is a sign that traders will need to go Long.
• Similarly when the signal line hits the 75 point mark, the signal which generates is a sell point.
MetaTrader users will definitely like working with this indicator, simply because STC generates more signals in comparison to MACD. It will also serve as a warning notification to change in trends on the extreme left along with a long red candle stick.
Some essential pointers to keep in mind when using it:
When using it, do keep a watch on the number of times its straight line alters to present an OverSold or OverBought market picture.
Those who use this indicator will state; the cyclic characteristics of this indicator will make the overbought change into oversold and vice-versa. This is the only glitch of this technical tool and such issues are primarily a ‘once in a blue moon sort of thing.’
If it does happen, one tip to take care of it would be to not jump into any sort of conclusions and wait for the signal to form completely.
Test it out prior to live usage:
Schaff Trend Cycle Indicator is surely a great instrument which you can incorporate into your trading arsenal. It gives off very rare false signals, and the useful ones occur faster to say MACD.
Do test it out this Forex cycle indicator via demo trading to see how well it functions and also to familiarize with it. It would only serve you good when you go live.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.