Super trend is simple and easy to use indicator and gives a precise reading about an on going trend.
It is built with two parameters, namely period and multiplier.
The Buy and Sell signal modifies once the indicator tosses over the closing price. When the Super trend closes above the Price, a Buy signal is generated, and when the Super trend closes below the Price, a Sell signal is generated.
The illustration chart below depicts how Super trend Indicator look like on a price chart.
Super Trend Indicator Setting
Signal Periods 14
The default values used while constructing a superindicator are...........for average true range(ATR) The best suitable value for Intraday trading would be 14 days and 2.1, 2.2 for its multiplier.
In the illustration chart below, the Super trend indicator has a setting of 2.2 Multiplier, We can notice the price Buy and selling level will be changed according ATR valuation.
The average true range (ATR) plays a vital role in 'Supertrend' as the indicator uses ATR to calculate its value. The ATR indicator signals the scale of price volatility.
Where can a Super trend indictor be used?
A ‘Supertrend’ indicator can be used on equities, futures or forex, and also on daily, weekly and hourly charts as well but normally, it is unsuccessful in a sideways-moving market.
Like any other indicator, ‘Supertrend’ works best when used with other indicators such as MACD, Parabolic SAR, RSI, etc.
A ‘Supertrend’ also acts as a strong support or resistance and it also provides a trailing stop loss for the existing trade.
Prior to the super trend indicator, knowledge of the ATR is necessary as super trend employs ATR values to calculate the indicator values.
The supertrend indicator is plotted over the price chart of the stocks or the index. The indicator is a continuous line which changes its color between green and red based on the price movement in the underlying.
An important thing which has to be understood here is, Super trend does not predict the direction, rather once the direction is recognized it will direct you to initiate a position and recommends you to stay in the position till the trend maintains.
Note worthy functions:
For Long position
When the long position has been recognized, the trader is recommended to hold the position till the price closes below the green line. The green line acts as a trailing stoploss for the long position.
For Short position
A sell signal is generated when the stock/index price turns lesser than the indicator value. At this stage, the indicator color turn red and you can also see a crossover of the price versus the indicator (price lesser than indicator value)
The sell signal can be used to commence a fresh short or exit long. Waiting for the sell signal to exit the existing long position can sometime lead to taking a loss. So the trader should use his judgment here.
Once the short position has been recognized, the trader is recommended to hold the position till the price closes below the green line. So in a sense the red line helps as a trailing stoploss for the short position.
The supertrend indicator is a better tool for Intraday trading when compared to a regular Moving Average trading system.
How to use super trend indicator Enrich Market Hunt
Right client on chart there will be showing so many indicators you have select Supper Trend indicator.
And then default setting Box will be open, multiplier 1.7 which is the commonly using many people, with Periods 14 days.
If you want modify Buying and selling signal then you have to change multiplier 2.1
which is the best trading strategy.
Period refers to the ATR number of days. The default value on Market Hunt is 14, which means to say that the system will calculate the ATR value for the last 14 days. You can input any value you deem suitable.
The multiplier refers to a value by which the ATR will get multiplied. The default value on Market Hunt, so whatever is the value of ATR, it will get multiplied by 14
Multiplier is a vital input for Super trend. If the multiplier value is too high, then lesser number of signals is made.
Similarly, if the multiplier value is too small, then the occurrence of signals increase, hence chances of making false trading signals are quite high.
We would recommend you keep this value between 1.7 and 2.5multiplier