SuperTrend

Overview

The SuperTrend Indicator is a trend-following indicator that is used to identify the current market trend and the potential reversal of a trend. It is plotted on the price chart and the direction of the line indicates the direction of the market.

Calculation

• The first step is to calculate the Average True Range (ATR) over a specified period (usually 7 or 14 periods).

• The multiplier value (usually set to 2) is then applied to the ATR, and the result is added to or subtracted from the closing price, depending on whether the market is in an uptrend or a downtrend.

• The final output is the Super Trend line, which acts as a trend-following indicator.

Interpretation

The SuperTrend Indicator is interpreted as follows:

• When the SuperTrend line is below the price, it suggests an uptrend.

• When the SuperTrend line is above the price, it suggests a downtrend.

• A change in the position of the SuperTrend line (from below to above the price or vice versa) indicates a trend reversal.

Indicator Triggers:

We consider only body closes for those triggers.

Price swap to support/resistance:

If the price swap up/down the Super Trend line, but the candle body close is coming back to the initial side, no signal will be triggered.

We want to long or short only after the price has swapped up or down the Super Trend. The signal will be active only during the following 1 hour candle.

Pin cross:

We want to long or short only after the price has crossed up or down the Super Trend resistance / support.

Distance:

We want to long only after the price reach a distance between 2 and 5% from the Super Trend support.

Notes :

• Entry Points: Traders often use the Supertrend to time their entry into a trade. For example, a long (buy) position could be considered when the price crosses above the Supertrend line in an uptrend, indicating a potential bullish move. Conversely, a short (sell) position could be considered when the price crosses below the Supertrend line in a downtrend, signaling a potential bearish move.

• Exit Points: The Supertrend also helps traders determine exit points. When the price crosses below the Supertrend line in an uptrend or above it in a downtrend, it may signal a potential trend reversal, indicating an appropriate time to exit the trade.

• Trailing Stop-Loss: Traders can use the Supertrend as a trailing stop-loss mechanism during trending markets. As the price moves in the favor of the trade, the Supertrend line adjusts and provides potential stop-loss levels to protect profits.