Supertrend Indicator: Generates Clear and Simple Trend Trading Signals
As the name suggests, the Supertrend indicator, like moving averages and MACD, is an indicator for trend tracking. Supertrend indicator is determined by price, and its values determine the current trend.
It is easy to use and gives an accurate idea of the current trend. This tool can be used on futures, Forex, and stocks.
It should also be noted that this Forex indicator can determine support and resistance levels.
Supertrend indicator is a very good tool for studying current market trends. It clearly describes the difference between downtrend and uptrend.
The formula for calculating Supertrend is as follows:
- SuperTrend Superior = (higher + lower) / 2 + m * ATR (n)
- SuperTrend Lower = (higher + lower) / 2 - m * ATR (n)
- n is the number of ATR billing periods.
- m is the volatility factor measured by ATR.
Thus, ATR occupies a key place in the Supertrend indicator formula.
Supertrend is built on the basis of two parameters. The default values used for the Supertrend indicator are 10 for the Number_of_Periods parameter and 3 for the Multiplier parameter.
Supertrend indicator parameters are usually adjusted depending on the volatility of the asset being traded. If the asset is more volatile, you can increase the default values, and if the asset is not volatile, you can decrease the default values.
You can reduce the multiplier parameter if you need the Supertrend indicator to respond faster to price changes, but in this case, it can create quite a lot of false signals. Typically, the default settings are better than other values.
The Supertrend curve is superimposed on the price chart, and when the indicator falls below the closing price, it generates a buy signal, then the indicator color turns green. This also suggests that the trend is changing from downward to upward.
Conversely, when Supertrend closes above the price, it generates a sell signal, then the indicator color turns red. This suggests that the trend is changing from bullish to bearish.
The Supertrend indicator, in particular, acts as a level of support or resistance. After a buy signal, any decline in the indicator curve can also be interpreted as a buy signal, and vice versa.
Supertrend gives traders clear and easy to read signals. This trading tool can be used on stocks, futures, or currencies, as well as on daily, weekly, and hourly charts.
It works much better in a trending market but can give false signals when the market moves sideways. We recommend using this indicator in conjunction with other tools when building your trading strategies to more accurately identify trends.
You can find some of the trading strategies based on the Supertrend indicator on our website in the Strategies section.
Download the Supertrend MT4 indicator from the button below
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Do you need help with installing this indicator into MT4 for Windows or Mac OS? Our guide HERE will help you.