Schaff Trend Cycle NLMA Indicator
Schaff Trend Cycle NLMA indicator is an ideal tool for determining the trend direction and market reversal.
Description
The Schaff Trend Cycle NLMA indicator, developed by Doug Skaff, is calculated using the MACD. As the name suggests, it uses a faster non-lagging moving average which makes the indicator react faster to market changes. In addition to MACD, the indicator also uses a smoothed stochastic. This means that it is a combination of two indicators. You can use the indicator to trade any currency pair on any time frame.
How to use the Schaff Trend Cycle NLMA indicator
The range of the indicator values is from 0 to 100. Like the MACD, the level should inform you about buying or selling.
- Signal to buy — buy when the indicator rises above 25 levels. The indicator color will change to green. In addition, you can filter out bad signals by providing a candle after the trigger candle closes above the trigger bar.
- Sell signal — sell when the indicator falls below level 75. The indicator line turns orange. Similarly, the behavior of candlesticks can help you filter out bad signals. The candle after the trigger bar should close above the trigger.
Trading Example
The figure shows the price behavior of the USD/CHF currency pair. The indicator gives a buy signal when it rises above the 25th level. In addition, the indicator changes color to green during an uptrend. You would make a profit if you went long. Similarly, the indicator crossed below 75, indicating a downtrend. Moreover, the indicator changed color to orange, signaling a downtrend in the market. Therefore, you should enter a short position.
Conclusion
The indicator uses the MACD and Stochastic to determine the direction of the trend and display a reversal. You only need to make sure that the indicator changes color and passes levels 25 and 75. The Schaff Trend cycle without lag will suit you if you are trading with the trend.