Introduction
The Supertrend indicator might not be one of the most widely used technical indicators, but it is definitely one of the most useful because it basically tells you the current trend for any forex pair (and in any given time frame) that you wish to look at.
A Supertrend is a trend following indicator which is similar to moving averages. It is plotted on price, and its placement can define the current direction. Free Super Trend Indicator for MetaTrader 4/5. A Big Collection with Forex Indicators, Trading Systems, Expert Advisors for MQL4 & MQL5 by Best-MetaTrader-Indicators.com. This is a redesign of the SuperTrend indicator. It removes stupid transitions between SuperTrend states and highlights initial points for both lines. SuperTrend is a. The Supertrend indicator is a volatility based indicator that shows the direction of the predominant price action. We can use the indicator for buy and sell signals as well as multiple plots of the indicator as a trading system. Using two indicators gives us a trend filter which can help decrease the number of whipsaw trades we take.
You will find that it broadly moves in line with the underlying price and will either be green (indicating a bullish trend) or red (indicating a bearish trend). So it is very easy to use.
Where To Find This Indicator
I generally use the IG.com charts when trading the forex and stock markets because these use the ProRealTime platform, and the Supertrend indicator is available here if you wish to use it.
However I understand that it is also available with charting platforms such as Metatrader and with the charting software used by various different brokers, including Ninjatrader. However you may have to import the code from elsewhere if it’s not included as standard.
How To Use The Supertrend Indicator
The Supertrend indicator is very good at indicating the current trend, and therefore helping you determine whether you should be taking long or short positions, but I have always found it to be even more useful when it indicates a change of trend, ie when it switches from green to red or vice versa.
(Note that the price has to actually close above or below this indicator when the latest bar closes in order for it to change color and signal the start of a new trend).
It’s not necessarily that helpful on the shorter time frames because you get a lot of false moves, but it can be invaluable on the longer term charts, particularly after a peak or trough in the market or after a long period of sideways consolidation.
In addition, you can also this indicator to determine where you should place your stop losses because placing it a few pips below the Supertrend indicator if it is currently green, or a few pips above if it is currently red makes a lot of sense.
Default Settings
The default settings are 3,10, with 3 being the multiplier and 10 being the number of periods.
However you can adjust the multiplier down to get you into a trend quicker, or adjust it upwards to make it less sensitive to price changes, but 3 is pretty much the best setting in my experience.
You can also play around with the number of periods if you so wish, but once again I think it’s best just to use the default setting.
Final Thoughts
I wouldn’t necessarily recommend that you enter positions based solely on the Supertrend indicator because you do get a lot of false moves, and it can sometimes get you into a new trend a little bit late.
However if it clearly signals a breakout move after a long period of sideways consolidation, or if it clearly signals a trend reversal on one of the longer time frames, the Supertrend indicator can provide some great signals. This is particularly true if it is backed up by a few other indicators and some tell-tale candlestick patterns, for instance.
It can also be very useful if you use multiple Supertrend indicators on the same chart.
To demonstrate this point, check out this trading strategy that aims to capture the long-term trends on the daily and weekly charts just by using four separate Supertrend indicators with different settings.
What is Supertrend Indicator ?
Faster and simpler is today’s mantra and that is what supertrend indicator stands for. Being an intraday trader, it is difficult to stay aloof from the use of indicators. While there are numerous indicators available for quick technical analysis of the trades, here we will discuss the supertrend indicator. It is an indicator quite similar to Moving Average Convergence Divergence or MACD. If you are already using other indicators, it is quite simple to follow this one.
Supretrend indicator is created by Olivier Seban to work on different time frames. It works for futures, forex, and equities. It is used in 15 minutes, hourly, weekly, and daily charts. Based on the parameters of multiplier and period, the indicator uses 3 for multiplier and 10 for ATR as default values. Average True Range is represented by the number of days while the multiplier is the value by which the range is multiplied.
How to Use Supertrend Indicator ?
To use this Supertrend, you need to follow these steps:
- Open the chart of a particular stock you want to trade.
- Fix the time interval of 10 minutes for the intraday trading. For that you can use any good charting software.
- Insert the supertrend as your indicator. With this you can also set as 10 & 3 and it is possible to insert your own setting as well.
- Now start tracking when the signals are in your favor.
- You can also follow the arrows for the signals to buy and sell the stocks.
Using Supertrend, you can also analyze the stocks technically.In fact, it gives signals to go for long or short on confirmation of trend.
In order to use the indicator, open the chart of a particular stock you want to track and set time interval of 10 minutes for intraday trading. Any good charting software can be used. Insert supertrend as your indicator and keep the settings as 10 and 3. It is possible to insert your own settings as well. Now start tracking when the signals are in your favour. Once you plot the indicator, you will find pictures as shown in the charts here. Follow the arrows for the signals to buy and sell the stocks.
However, while you use this, better not avoid to put your stop loss. While aiming for a long position, you can put your stop loss right at the green indicator line. In another case, you can put it at the red indicator line. Using supertrend along with your implementing your stop loss pattern is the best way to earn the best wealth in trading.
The basic motive of the indicator is to give buy sell signal to the traders. It shows the change in trends by turning its flips. When the price of the stock goes high than the indicator value, the indicator gives the signal by turning the colour to green.
Vice versa, when the price goes down than the indicator value, a sell signal occurs. It is shown as the colour changes to red. The indicator quickly captures the short intraday trends. However, the default values of 10 and 3 are good while you use it. In an attempt to reduce the parameter, you might end up generating wrong signals.
Pros and Cons of Supertrend Indicator
As per many experts, supertrend indicator is best to use in combination with other indicators like MACD and RSI. However, let us see what are its own advantages and disadvantages.
The best thing about supertrend it sends out accurate signals on precise time. The indicator is available on various trading platforms free of cost. The indicator offers quickest technical analysis to enable the intraday traders to make faster decisions. As said above, it is extremely simple to use and understand.
However, the indicator is not appropriate for all the situations. It works when the market is trending. Hence it is best to use for short-term technical analysis. Supertrend uses only the two parameters of ATR and multiplier which are not sufficient under certain conditions to predict the accurate direction of the market.
Supertrend Indicator Formula and Trading Strategy
Basically, supertrend indicator is a wonderful tool to know the current market trends. It clearly depicts the distinction of the downtrends and uptrends.
The supertrend indicator calculation goes as stated below-
Up = (high + low / 2 + multiplier x ATR
Down = (high + low) / 2 – multiplier x ATR
Calculation of Average True Range –
[(Prior ATR x 13) + Current TR] / 14
Here, 14 indicates a period. Hence, the ATR is derived by multiplying the previous ATR with 13. Add the latest TR and divide it by period.
Thus, ATR plays an important role in the supertrend technical analysis indicator.
Supertrend Indicator Usethinkscript
Identifying Buy and Sell Signals
Understanding and identifying buying and selling signals in supertrend is the main crux for the intraday traders. Both the downtrends as well uptrends are represented by the tool. The flipping of the indicator over the closing price indicates signal. A buy signal is indicated in green colour whereas sell signal is given as the indicator turns red. A sell signal occurs when it closes above the price.
Check the given charts and see the sell signals shown with the red coloured arrows. You also see how you can trace your stop loss using this indicator and save your profits.
Also View – Best Intraday Trading Indicators
Supertrend Indicator For Tradestation
There are many certified technical analysis courses available at reputed share market training institutes. Newbies can learn to use indicators and technical analysis of the markets right from zero.
Conclusion
Nifty Trading Academy is not using supertrend indicator though. But we are educating our learners to use the indicator and to form a right trading strategy while using it. As a part of our advanced share market training course, we familiarize students with the indicator and train them to use it.
Supertrend Indicator Nt8
We also reiterate that no technical analysis tool is totally accurate and so we say it for supertrend too. Yet it helps you to make smart decisions and earn handsome profits. There are times when you get false signals which are yet again not as high as compared to other indicators. Hence, it is best to use the right combination of multiple indicators.