The SuperTrend indicator is one of the most popular trend-following indicators among traders. It plots a single line on the price chart that acts as a dynamic support in uptrends and dynamic resistance in downtrends. Its simplicity and effectiveness make it a favorite for both beginners and experienced traders.
What is the SuperTrend Indicator?
The SuperTrend is a trend-following overlay indicator that uses Average True Range (ATR) to calculate its values. It displays as a line that changes color based on the trend direction: typically green during uptrends and red during downtrends.
Key benefit: SuperTrend gives you clear buy and sell signals with built-in dynamic stop-loss levels. When the line is below price (green), you should be long. When it is above price (red), you should be short or out of the market.
How SuperTrend is Calculated
The SuperTrend uses two parameters: Period (for ATR) and Multiplier. The default settings are typically 10 for period and 3 for multiplier.
SuperTrend Formula
Basic Upper Band = (High + Low) / 2 + (Multiplier x ATR)
Basic Lower Band = (High + Low) / 2 - (Multiplier x ATR)
Final Upper Band = If Basic Upper Band is less than Previous Final Upper Band OR Previous Close was greater than Previous Final Upper Band, use Basic Upper Band, else use Previous Final Upper Band
Final Lower Band = If Basic Lower Band is greater than Previous Final Lower Band OR Previous Close was less than Previous Final Lower Band, use Basic Lower Band, else use Previous Final Lower Band
SuperTrend = When Close crosses above Final Upper Band, SuperTrend = Final Lower Band (uptrend). When Close crosses below Final Lower Band, SuperTrend = Final Upper Band (downtrend).
Reading SuperTrend Signals
Buy Signal
- SuperTrend line flips from above price to below price
- Line typically changes from red to green
- Price closes above the SuperTrend line
Sell Signal
- SuperTrend line flips from below price to above price
- Line typically changes from green to red
- Price closes below the SuperTrend line
Trading Example
Stock XYZ is at $50 with SuperTrend showing red (downtrend):
- Price rallies and closes at $52, crossing above SuperTrend at $51
- SuperTrend flips to green and moves below price
- This generates a buy signal
- Enter long at $52 with stop loss just below $51 (the SuperTrend level)
- As price rises, SuperTrend rises too, acting as a trailing stop
- Exit when price closes below SuperTrend again
SuperTrend Trading Strategies
Strategy 1: Basic Trend Following
- Buy when SuperTrend turns green (price crosses above)
- Set stop loss just below the SuperTrend line
- Trail the stop as SuperTrend rises
- Exit when SuperTrend turns red (price crosses below)
Strategy 2: SuperTrend with Moving Averages
- Add a 200-period EMA to your chart
- Only take buy signals when price is above the 200 EMA
- Only take sell signals when price is below the 200 EMA
- This filters trades to align with the larger trend
Strategy 3: Multiple SuperTrends
- Add two SuperTrends with different settings (e.g., 10,3 and 10,2)
- Buy when both turn green
- Sell when both turn red
- The faster SuperTrend (lower multiplier) provides early warnings
Strategy 4: SuperTrend Breakout
- Identify a consolidation range
- Wait for price to break the range
- Enter only if SuperTrend confirms the breakout direction
- Use SuperTrend as your trailing stop
Optimizing SuperTrend Settings
Period (ATR Length)
- Lower periods (7-10): More responsive, tighter stops, more signals
- Higher periods (14-21): Smoother, wider stops, fewer signals
Multiplier
- Lower multiplier (1-2): Tighter to price, more signals, more whipsaws
- Higher multiplier (3-4): More room for price movement, fewer signals, fewer whipsaws
Recommended Settings by Timeframe
- Intraday (5-15 min): Period 10, Multiplier 2-2.5
- Swing trading (Daily): Period 10, Multiplier 3 (default)
- Position trading (Weekly): Period 10, Multiplier 3-4
Using SuperTrend as a Stop Loss
One of the best uses of SuperTrend is as a dynamic stop loss:
- The line automatically adjusts based on volatility (ATR)
- In volatile markets, the stop is wider
- In calm markets, the stop is tighter
- This prevents getting stopped out by normal price fluctuations
Setting Your Stop
- For long positions: Place stop just below the SuperTrend line
- For short positions: Place stop just above the SuperTrend line
- Move your stop as SuperTrend moves, never backward
Advantages of SuperTrend
- Visual clarity: Single line with color changes is easy to read
- Built-in stops: Provides logical stop-loss levels
- Volatility adaptive: ATR adjusts to market conditions
- Trend following: Keeps you in trends until they reverse
- Simple rules: Above line = bullish, below line = bearish
Limitations of SuperTrend
- Lagging indicator: Signals come after price has moved
- Whipsaws in ranges: Generates false signals during consolidation
- Can miss bottoms/tops: By design, it catches the middle of trends
- Requires trending markets: Struggles when price moves sideways
Common Mistakes to Avoid
1. Ignoring Market Conditions
SuperTrend works best in trending markets. During ranging markets, consider tightening your settings or using additional filters.
2. Changing Settings Too Often
Stick with one setting long enough to evaluate its performance. Changing settings after every losing trade leads to inconsistent results.
3. Not Using Additional Confirmation
While SuperTrend can be used alone, combining it with other analysis improves results. Consider support/resistance, volume, or other indicators.
Track Your SuperTrend Trades
Pro Trader Dashboard helps you analyze which indicator setups and settings work best for your trading. Track your SuperTrend trades and measure real performance.
Summary
The SuperTrend indicator is an excellent tool for trend-following traders. Its ATR-based calculation adapts to market volatility, and its clear visual signals make it easy to use. For best results, combine it with trend filters like moving averages and avoid trading it in ranging markets.
Want to explore more trend indicators? Check out our Vortex Indicator Guide or learn about the Hull Moving Average.