The Schaff trading strategy for MT4 is a profitable trend-following strategy that can generate a decent outcome from an ongoing market trend. This method is mainly focused on market momentum. Moreover, we will use multiple trading indicators like ici360 Schaff EMA, super signal, Semafor point, Schaff trend, Schaff MACD set-up to increase the trading possibilities.
What is the Schaff trend cycle?
Doug Scaff invented this strategy in 1999. It is an MT4 indicator that helps to find trends, and likewise, it provides signals. Regardless of the time frame, currency trends speed up, and stoppage in a cyclical pattern is the presumption on which STC types of an oscillator are based.
How does the Schaff trend cycle work?
Numerous traders are homely with the indicator called MACD tool — to foresee the price action. Yet, due to the slow responsive signal line, it’s also infamous for lagging. On the contrary, the Schaff trend cycle qualifies it to identify the ongoing trend shortly. However, it also helps to find bearish and bullish trends.
Keynotes
- Schaff trend cycle (STC) indicator provides levels for buying and selling in the forex market.
- STC works faster than the MACD indicator.
- A disadvantage to STC is sustained in the overbought/oversold area for an extended period.
Schaff trading strategy for MT4
As a trend following strategy, first, we have to identify the market’s primary trend in the higher time frame to get highly accurate trades. As a trader, we can predict the market by 70% to 80%. However, the currency market is full of uncertainty. That’s the reason we have to develop a high accuracy trading method by using multiple indicators.
Let’s have a look at trading indicators for STC for MT4:
- Schaff MACD
- Schaff trend
- ICI360 Shaff EMA
- Super signal
- Semafor point
ICI360 Schaff EMA
It is built using EMA 5 and EMA 13. These two EMAs help to find the trend and identify signals.
- If the EMA 5 crosses EMA 13 upside, it indicates a buy signal.
- If the EMA 5 crosses EMA 13 downside, it shows a sell signal.
Super signal
It mainly provides market reversal signals by showing arrows.
- The Lime arrow indicates potential buy points of the market.
- The yellow arrow indicates sell points of the market.
This indicator provides a highly accurate trade signal by calculating market reversal points.
Semafor point
It is the most popular custom-made indicator. This indicator is very reliable when you will understand how to use it. Semafor Points mainly provide the market’s shorter and longer swing points in numbers and different colors.
Bullish trading strategy
The Schaff trading strategy for MT4 is appropriate on all time frames from five minutes to daily. However, the one-hour and four-hour gives high gains as they are squeezing out the short-term impacts of the economic events.
However, you can trade on any currency pairs you wish, such as GBP/USD, GBP/CAD, GBP/NZD, EUR/JPY, GBP/JPY, USD/JPY, EUR/USD, EUR/CAD, EUR/NZD, etc.
Bullish trading conditions
- Schaff trend is green
- MACD cross upside
- EMA’s cross upside
Entry
After confirming all the trading conditions, you should wait for the candle to close and execute the buy trade as soon as the candles close. Do not enter before closing the candle because it may impact your capital if the trade goes against you.
Stop loss
The stop loss should be below the previous swing low with a 10-20 pips buffer in the H4 time frame and a 10-15 pips buffer on the H1 time frame.
Take profit
The ideal take profit level is based on a 1:1.5 or 1:2 risk: reward ratio. Therefore, if your stop-loss is ten pips, you should set the take profit at 20 pips. Alternatively, you can take the profit when the Schaff trend becomes red.
Bearish trading strategy
It is also applicable to all time frames from five minutes to daily, where the one-hour and four hours can provide high gains as they essence the short-term impacts of the economic events.
However, you can trade on any currency pairs you wish, such as GBP/USD, GBP/CAD, GBP/NZD, EUR/JPY, GBP/JPY, USD/JPY, EUR/USD, EUR/CAD, EUR/NZD, etc.
Bearish trading conditions
- Schaff trend is red
- MACD cross downside, or
- EMA’s cross downside
Entry
After confirming all the trading conditions, you should wait for the candle to close and execute the sell trade as soon as the candles close. Do not enter before closing the candle because it may impact your capital if the trade goes against you.
Stop loss
The stop loss should be above the previous swing high with a 10-20 pips buffer in the H4 time frame and a 10-15 pips buffer on the H1 time frame.
Take profit
The ideal take profit level is based on a 1:1.5 or 1:2 risk: reward ratio. Therefore, if your stop-loss is ten pips, you should set the take profit at 20 pips. Alternatively, you can take the profit when the Schaff Trend becomes green.
Final thoughts
The Schaff trading strategy for MT4 is the most profitable trading method because it depends on the high accuracy indicators like MACD, EMA, Schaff trend indicator, etc. Therefore, you can gain decent trading results at the end of the month. However, in FX trading, there is no 100% guaranteed profit in each trade. Moreover, in every trading system, success depends on trade management.
Therefore, you should utilize the proper money management system and better psychological states to get a better outcome from this trading strategy. In addition, you can trail your stop loss level to break even when your trade is already in profit. Afterward, to take profit, you can target the next support or resistance level.
