Many traders are familiar with the moving average convergence/divergence ( ) charting tool, which is an indicator that is used to forecast price action and is notorious for lagging due to its slow responsive signal line . By contrast, STC’s signal line enables it to detect trends sooner. In fact, it typically identifies up and downtrends long before indicator.
While is computed using the same exponential moving averages as , it adds a novel cycle component to improve accuracy and reliability. While is simply computed using a series of moving average, the cycle aspect of is based on time (e.g., number of days).
It should also be noted that, although was developed primarily for fast currency markets, it may be effectively employed across all markets, just like . It can be applied to intraday charts, such as five minutes or one-hour charts, as well as daily, weekly, or monthly time frames.
is used to quantify trend strength. calculations are based on a moving average of price range expansion over a given period of time. The default setting is 14 bars, although other time periods can be used.1 can be used on any trading vehicle such as stocks, mutual funds, exchange-traded funds and .
is plotted as a single line with values ranging from a low of zero to a high of 100. is non-directional; it registers trend strength whether price is trending up or down.2 The indicator is usually plotted in the same window as the two indicator (DMI) lines, from which is derived (shown below).Quantifying Trend Strength
values help traders identify the strongest and most profitable trends to trade. The values are also important for distinguishing between trending and non-trending conditions. Many traders will use readings above 25 to suggest that the trend is strong enough for trend-trading strategies. Conversely, when is below 25, many will avoid trend-trading strategies.
Value Trend Strength
0-25 Absent or Weak Trend
25-50 Strong Trend
50-75 Very Strong Trend
75-100 Extremely Strong Trend
Low is usually a sign of accumulation or distribution. When is below 25 for more than 30 bars, price enters range conditions, and price patterns are often easier to identify. Price then moves up and down between resistance and support to find selling and buying interest, respectively. From low conditions, price will eventually break out into a trend. Below, the price moves from a low to an uptrend with strong .
Added Buy/Sell alerts
filters based on the threshold you put in the settings.
great for trend and trade confirmation
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