What is supertrend indicator?

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What exactly is a supertrend indicator?

 

 

It is a trend-following indicator. It is drawn in stock price charts for investors and shows strongly observable trends in red when prices have fallen and green when prices have increased.

 

This indicator is simply dependent on two factors: period and multiplier. Traders typically employ ten periods - the average true range number of days (ATR - yet another indicator that provides market volatility value by decompressing the price range of a security for a given time) - and three multipliers (A multiplier is a value by which ATR would be multiplied). ATR is important in this indicator since it is utilised to produce a value from which the degree of price volatility can be tracked. If all of this seems too complicated, don't worry; systems and screeners can now handle the arithmetic for you in seconds; simply select the alternatives on your pc and set up your trade plan!

 

Olivier Seban created the Supertrend Indicator to function on many time frames. It is applicable to futures, currencies, and stocks. It can be run every 15 minutes, hourly, daily, or weekly charts.

 


How to use supertrend indicator?

 

The following is a step-by-step approach to using this indicator:

 

  1.          Open the chart for the stock you want to trade.
  2.           If you want to trade intraday, set a time interval of 10 minutes.
  3.          As your indicator, choose supertrend.
  4.          You can set the parameter values to 10 and 3, or you can insert your own.
  5.           Begin noticing when the signals are in your favour.
  6.          You can also use the arrows to determine whether to buy or sell.





It is very advised to have a stop loss in place. When aiming for long positions, place your stop loss at the green light indicator; similarly, when looking for short positions, place your stop loss at the red light indicator.

 

 

What are the supertrend indicator's parameters?

 

 

The most common parameter values are 10 and 3. Any trading indication has no fixed setting. Any changes in this number may have an impact on the use of the supertrend indicator. Furthermore, the more parameters you change, the more likely it is that your trading system will be over-optimized for that point in time.

 

Notable points:


  1. Smaller settings will make the indicator more responsive to price changes, potentially resulting in more indications.
  2. Higher settings will remove market false alarms at the cost of lesser trading signals.

 

 

The advantages and disadvantages of the supertrend indicator

 

 

This indicator is free to use on practically all trading platforms. The supertrend provides the most reliable signals for precisely timing trades. As an intraday trader, you may make better selections with the help of the indicator. On the other hand, the indicator works best when the market is trending and not in all market stages.

 

To receive filtered signals, such a trend indicator must be used in conjunction with other indicators like as RSI and Parabolic SAR. Furthermore, only two parameters are employed to reach any conclusion, which may not be sufficient under particular market conditions. Aside from not being correct in all cases, it also produces varied outcomes for different stocks.

 

Intraday traders can use this supertrend indicator to make quick judgments because it can provide analysis for a specific stock in a matter of seconds. This indicator is similar to moving averages in that it can generate entry and exit signals on several periods. Combining the results of the supertrend indicator and other such indicators increases the likelihood of getting the most accurate results.

 

 

FAQ

 


How to identify buy and sell signals using supertrend indicators?

 

This indicator works equally effectively whether the market is heading upward or downward. A purchase signal is issued when the trend closes below the price and the colour changes to green. When the trend closes above the price, the colour changes to red, signaling a sell indication.

 

No indicator, including the supertrend indicator, can guarantee 100% accuracy. False signals may also be generated, though the chances of this happening are slim. However, it is always beneficial to utilise this indicator in conjunction with other indicators in order to obtain better trade signals. With the use of this signal, you can filter out stocks and trade accordingly.

 


Most appropriate timeframe for the supertrend indication



Swing traders and position holders typically employ longer periods because they make it easier to spot absolute trade signals following trend confirmation and outperform short-term volatility. The 15-minute chart is the smallest time window that is available. Additionally, you can place this indicator on a longer time frame, move it to a shorter time frame, and then utilise it to signal entry and exit points.

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