Constructing the Schaff Trend Cycle from MACD and a dominant-cycle window

What the display is built from

The Schaff Trend Cycle is a three-parameter trend oscillator that pairs a bar-cycle length with two exponential-average lengths and fixed high and low bands. Those bands can stay extreme while the underlying move continues. In the archive workflow it is displayed as STC(10, 23, 50) with horizontal guides at 25 and 75.

MACD is a zero-centered comparison of two exponentially smoothed averages. Mutual crossovers, zero-line crossings, and divergences are the listed signal events. The exponential moving average used in that construction applies weight k = 2/(n+1) to the latest close and the complementary weight to the prior average.

The dominant-cycle window

A dominant cycle is a lookback counted in bars that sets how many turns the oscillator is allowed to mark. The dominant-cycle setting in the worked example is 20 bars. The cycle framework described there allows at most 20 additional bars of extension before the cycle window itself is the quantity to lengthen.

Reducing the cycle count increases the number of turns marked. Raising it reduces the number of turns and is described as increasing cycle accuracy. Shortening the window multiplies turns. Lengthening it is treated as the more cycle-accurate setting.

Reading a band extreme with a regime crossover

Overbought or oversold oscillator states are read together with 23- and 50-period exponential-average crossovers rather than as standalone reversal marks. The same two exponential lengths are reread as a bullish or bearish average cross so an oscillator extreme is not treated as a standalone reverse mark.

An hourly reading of 92 is treated as an overbought state that can persist while price continues in the same direction until a later signal time. A high-band reading can last for many bars, so the extreme is a state to wait through until a later signal time.

Intended regime and parameter fit

The construction is classified as a trending indicator. Sideways signal lines and congestion are treated as conditions outside its intended use. Parameter adjustments are judged successful when the signal line tracks the price bars, not when more turns appear.