What is the Supertrend Indicator

 

🔍 What is the Supertrend Indicator?

The Supertrend is a trend-following indicator that works on price and volatility. It helps traders identify the direction of the market and generate buy/sell signals. Unlike moving averages, the Supertrend indicator follows the current trend and gives clear entry and exit points.

---

⚙️ How does the Supertrend Indicator Work?

The Supertrend indicator is based on:

• ATR (Average True Range) – measures market volatility

• Multiplier – a user-defined value to multiply with ATR (commonly 3)

✅ Formula:

Supertrend = Middle Price ± (Multiplier × ATR)

Where:

• Middle Price = (High + Low) / 2

• ATR = Average True Range (default period is 10)

• Multiplier = Usually 2 or 3

---

📈 When does it Give a Buy Signal?

• When the price closes above the Supertrend line.

• The Supertrend color turns green (bullish).

• This suggests a buy opportunity as the trend is going upward.

✅ Buy Signal Rule:

• Price crosses above Supertrend

• Supertrend line flips below the price

• Supertrend color turns green

---

📉 When does it Give a Sell Signal?

• When the price closes below the Supertrend line.

• The Supertrend color turns red (bearish).

• This suggests a sell opportunity or a short trade.

❌ Sell Signal Rule:

• Price crosses below Supertrend

• Supertrend line flips above the price

• Supertrend color turns red

---

📊 Example of Supertrend Signals:

Price Action	Supertrend Line	Signal
Price > Supertrend	Line is below	✅ Buy
Price < Supertrend	Line is above	❌ Sell

---

🔄 When to Exit a Trade?

• You can exit a buy trade when a sell signal appears (line turns red).

• Exit a sell trade when a buy signal appears (line turns green).

---

🛠️ Best Settings (Commonly Used):

• ATR Period: 10

• Multiplier: 3

These can be adjusted based on your trading style:

• Use lower values for short-term trading (more signals)

• Use higher values for long-term trading (fewer but stronger signals)

---

📌 Important Tips:

• Use Supertrend with other indicators like RSI, MACD, or VWAP for confirmation.

• Avoid using Supertrend in sideways or choppy markets — it gives false signals.

---

✅ Summary:

Condition	Action
Price crosses above Supertrend	Buy
Price crosses below Supertrend	Sell
Supertrend is Green	Uptrend
Supertrend is Red	Downtrend