Supertrend indicator was developed by Olivier Seban. It works at all the time frames i.e. 1 minute, 5 minutes or 15 minutes.

  • The Supertrend Indicator is simply one of the easiest trend trading system. Furthermore, it is very effective.
  • Supertrend, as the name suggests, is a trend following indicator. It works much better than moving averages and MACD which are also useful trend following indicators.
  • Supertrend is a trending indicator. Moreover, just like all trending indicators, it works well in trending markets (i.e. in uptrend and downtrends).
  • Supertrend is built using two parameters, and the commonly used one are 10 and 3.
  • If you are a day trader, then you can use other indicators along with Supertrend indicator to confirm the signal.

Supertrend Indicator Formula and Calculation

  • Supertrend indicator shows trend direction. In addition,it provides buy or sell indicators.
  • It predicts using a mixture of the average price rate in today’s period along with a volatility indicator.
  • The ATR indicator is useful in form of a volatility indicator.

Calculation of Values as per Formula :

BASIC UPPERBAND = (HIGH + LOW) / 2 + Multiplier* ATR

BASIC LOWERBAND = (HIGH + LOW) / 2 – Multiplier* ATR

FINAL UPPERBAND = IF ((Current BASIC UPPERBAND< Previous FINAL UPPERBAND) and (Previous close < Previous FINAL LOWERBAND)) THEN (Current BASIC LOWERBAND) ELSE Previous FINAL LOWERBAND)

FINAL LOWERBAND = IF( (current BASIC LOWERBAND > Previous FINAL LOWERBAND) and (Previous Close < Previous FINAL LOWERBAND) ) THEN (Current BASIC LOWERBAND ) ELSE Previous FINAL LOWERBAND )

SUPERTREND = IF (Current Close <= Current FINAL UPPERBAND) THEN current FINAL UPPERBAND ELSE Current FINAL LOWERBAND

Calculation of Average True Range :

[(Prior ATR × 13) + Current TR] / 14

Here, 14 indicates a period. Therefore, the derivation of ATR is by multiplying the previous ATR with 13. Furthermore, add the latest TR and divide it by Period. 

How to Use Supertrend Indicator?

To use S.T. , you can follow these steps:

  1. Open the chart of a particular stock you want to trade. [Nifty Live Chart with Super Trend]
  2. Set the time interval of 10 minutes for intraday trading. For that you can use any good charting software.
  3. Insert Supertrend as your Indicator.In addition, keep setting as 10 & 3. In fact, it is possible to insert your own setting as well.
  4. Now start tracking when signals are in your favor. Furthermore, follow the arrows for the signals to buy and sell the stocks.

Using S.T., you can analyse any stocks technically. In fact, it gives signals to go for long or short on confirmation of trend. Furthermore, it works best in a trending market. For instance, the uptrend or downtrend can be known in any type of market.

While using super trend indicator, it is better to put stop loss. In fact, you can use the indicator line for stop loss. In addition, you can also trail it as the price move in either direction. Therefore, using Supertrend along with your stop loss pattern is the best way to earn good returns in trading.

Supertrend Trading Strategy for Buy and Sell:

The main crux for the intraday traders is to identify buying and selling signals in Supertrend.

Supertrend represents the downtrends and uptrends. In fact, the flipping of the indicator over the closing price indicates signal.

  • Green colour indicates a buy signal
  • Red color indicates a sell signal
  • A sell signal occurs when it closes above the price.

Double S.T. Strategy:

Follow the steps given below to apply this strategy for Intraday trading.

  • This strategy works above 15 minutes.
  • Input Supertrend indicator with parameter 2 and10(green colour).
  • Input another Supertrend indicator with parameter 3 and 10 (red colour).

⬆ For Buy signal :

When it generates buy signals, you can put your stop loss at red Supertrend indicator, as shown in below image.

Supertrend-Strategy-Buy-Trade

⬇ For Sell Signal :

When it generates sell signals, you can put your stop loss at the red Supertrend indicator, as shown in below Image.

SuperTrend Sell signal
SuperTrend Buy signal

Note: You can use 4, 10 parameter with 200 EMA in single super trend for best results in Nifty.

Learn : Top #3 Intraday Trading Strategies

Advantages of SuperTrend Indicator

As per many experts, Super Trend is best to use in combination with other indicators like MACD and RSI.

  • The best thing about Supertrend is it sends out accurate signals.
  • This indicator sends signals on precise time.
  • It is available on various platforms free of cost.
  • The indicator offers quickest technical analysis to intraday traders.
  • Easy for intraday traders to make faster decisions.
  • It is easy to use and understand.

Disadvantages

  • The Super Trend is not appropriate for all the situations.
  • It works when the market is trending.
  • Supertrend uses only the two parameters of ATR and Multiplier.They are not sufficient under certain conditions to predict the accurate direction of the market.

Learn More About: Best Intraday Trading Indicators

Note: Supertrend indicator is not accurate for all the situations. It shows the different results for different stocks. Before using this indicator for trading, one should backtest it by applying different parameters for different stocks.

Supertrend AmiBroker AFL :

Author

Prashant Raut is a successful professional stock market trader. He is an expert in understanding and analyzing technical charts. With his 8 years of experience and expertise, he delivers webinars on stock market concepts. He also bags the ‘Golden Book of World Record’ for having the highest number of people attending his webinar on share trading.

Write A Comment