SuperTrend

What it is and how to use it

What is it?

The SuperTrend is a trend-following indicator that uses price and volatility to identify the direction of the trend. It is plotted on the price chart and can help traders identify entry and exit points based on the prevailing trend.

Who made it?

The SuperTrend indicator is widely used among traders, but its origin is not attributed to a single creator.

How is it calculated?

The SuperTrend calculation involves using the Average True Range (ATR) to determine the

level at which the trend changes. The calculation is as follows:

1. Calculate the Average True Range (ATR):

   1. ATR = averageperiod, where: TR = max(high - low, abs(high - close[1]), abs(low - close[1]))

2. Calculate the Basic Upper and Lower Bands:

   1. Basic Upper Band = (high + low) / 2 + multiplier * ATR

   2. Basic Lower Band = (high + low) / 2 - multiplier * ATR

3. Determine the SuperTrend:

   1. If close crosses above the previous SuperTrend, the trend is up: SuperTrend = Basic Lower Band

   2. If close crosses below the previous SuperTrend, the trend is down: SuperTrend = Basic Upper Band

Code (ProRealTime)

How do you use it?

Trend Direction:

The SuperTrend line changes color based on the direction of the trend. When the SuperTrend is below the price, it indicates an uptrend. Conversely, when the SuperTrend is above the price, it indicates a downtrend.

Entry and Exit Signals:

Traders often use the SuperTrend indicator to generate entry and exit signals. For example, a buy signal is generated when the price crosses above the SuperTrend line, indicating a potential uptrend. A sell signal is generated when the price crosses below the SuperTrend line, indicating a potential downtrend.

FAQ

Q: What are the best settings for SuperTrend?

A: The default settings for SuperTrend are a 10-period ATR and a multiplier of 3. Feel free to adjust these settings based on your trading strategy and the asset being traded.

Q: Is SuperTrend good for day trading?

A: SuperTrend can definitely be useful for day trading! It helps you identify trend direction and potential entry and exit points based on price and volatility.

Q: Can SuperTrend be used alone to make trading decisions?

A: While SuperTrend provides valuable trend signals, it’s usually better to combine it with other indicators to confirm trends and avoid false signals.

Strategies using SuperTrend

• None so far.