Trading rules for the super trend strategy
Working with the indicator is quite simple since all you need to do is to look at it. When loaded on a chart, it appears like the moving average indicator.
However, unlike the MA, it changes color depending on the prevailing trend. Below is a chart with the Supertrend indicator: As you can see, the indicator is quite similar to the moving average. There are a few differences such as the distance from the price, the behavior when crossing over, and the change of color.
It takes into consideration the previous high and close of a specified period in its calculations.
Being an intraday trader, it is difficult to stay aloof from the use of indicators. While there are numerous indicators available for quick technical analysis of the trades, here we will discuss the supertrend indicator. If you are already using other indicators, it is quite simple to follow this one.
That said, when a market is highly volatile, then the ATR will be high. On the other hand, if there is little volatility, then we ATR will be low. Buy and Sell Signals The Supertrend indicator is more of a lagging indicator as it depends on current price action to give signals.
How To Use Popular Supertrend Indicator For Intraday Trading
In short, it does not predict the future behavior of price. Rather, it shows you what is happening at the moment.
Let me burst your bubble: in as much as the indicator seems too promising, it is not the holy grail of trading. There is none. Once you load it to your chart, you will realize that there are times when it captures the trends very early. On the sadder side, sometimes, it gives you a signal when the trend has happened, so you miss the juiciest moves. What this should tell you is that it is impossible to be profitable by following the Supertrend indicator blindly.
In short, you should have a secondary means of filtering the signals so that you only pick the ones with high winning probabilities. In the chart below, we are going to see what would happen if we took all the signals that the indicator gave us. As you can see, the indicator was giving us good entry signals most of the time, but the exits somehow came late after we had lost most of the pips made.
Trading strategy - SuperTrend
For instance, even in places where we ended up with 0 pips in profit, the market had given us tens or even thousands of pips before reversing and closing. Bearing in mind that the above chart covers two months, making 66 pips and losing another 16 means we would have made 50 pips. While this is still better than making a losing trade, it is still painful to have lost hundreds of other pips.
Therefore, while the Supertrend indicator is a good tool, it is not commendable to use it on its own. Best Settings to Use Just like any other indicator, the Supertrend has no fixed or definite setting that works for everyone all the time.
I would say the setting you choose is up to you.
- Free trading strategies which can be automated: the SuperTrend break-out strategy.
- Supertrend Indicator - What is, How to Use, Formula, Strategy - NTA™
Typically, the indicator has a default setting of 10 ATR period and 3. If you reduce the settings too much, then the indicator will give a lot of signals, in which most of them will be false.
Similarly, if you raise the numbers too high, the indicator will give fewer signals, meaning you might lose a lot of good trading opportunities. As such, start trying the indicator with its default settings and play around with them until you find the best ones that work for you.
Best Timeframe to Use Just like the settings, it is up to the user to decide which timeframe to use the Supertrend indicator on.
Supertrend Indicator : How to use for Intraday trading?
If you are a day trader, you can use it on the M5, M15 or M30 charts. As for swing traders and position holders, they can use the other timeframes starting from H1 and up.
In fact, I also face such kind of situation in my early days of trading in stocks and commodities till I found Supertrend Indicator. Retail traders always asked me whenever I buy any stock, it comes down and the moment I sell, the stock started to move upward. Does this sound familiar to you? It may happen that you may make some money and take trading as like gambling. This kind of trading is very risky and you may have to face serious losses.
It can also be used on multiple timeframes where you place it on a larger timeframe then go down to a lower timeframe and use it for entry and trading rules for the super trend strategy signals. It is important that I mention what I have seen from many traders that have used this indicator; that the lowest timeframe you should use is the minute chart.
In a previous postwe have discussed how to use Supertrend and how it performs better than many of the trending indicators out there. The default parameters for Supertrend are 10,3. But, if we reduce the parameters to say 5,1. Supertrend 5,1.
True to their word, if you just skim over an M5 chart with the typical Supertrend on it, you will see that there are tens of signals.
Most of them are false and even where the trend sustains itself a little; the accumulated pips are insignificant to cover the losses. On the brighter side, when you load it on a higher timeframe such as the H1, you will notice that there are fewer signals. You will also notice that the winning trades are bigger than the losing ones, meaning that with a proper strategy, then you can always remain in the positive end. Where to Find It? Some trading platforms such as the MT5 have the Supertrend included in the in-built indicators section.
- Using the Supertrend Indicator, you can objectively determine the state of the market which will make your trading easier.
- Supertrend Indicator Strategy | Supertrend Indicator Formula Parameters
- Add the latest TR and divide it by period.
For others, such as the older MT4, the indicator is not included in the program when installing it, not unless your broker has included it. If your trading platform does not have it, you can download the indicator online and include it.
Supertrend Indicator Strategy
The indicator is now popular, so coders have made a version for almost every trading platform including Ninja Trader, eTrader, Trade Station, MT4, and so on. Just search for it online. Sample Strategy using the Supertrend Indicator Always remember that indicators should never be used as the ultimate trading decision-makers. Only use them to assist you in spotting potential trading rules for the super trend strategy or confirming signals that you have identified using your primary way of analysis.
That said; this tool can be combined with almost any other trading approach. In this section, we are going to look at a trading strategy that uses two settings of our Supertrend indicator. This indicator will be giving us the entries. You can change the color or width of this bigger indicator so that you can tell them apart.
This instance of the indicator will be giving us the main trend direction. In our case above, we had it changing from red to green.
What is Supertrend Indicator and How it is Used
Then open a sell trade. In our chart, we were expecting a buy trade. So, when the smaller Supertrend turned to green, we opened a buy trade. In Conclusion… The Supertrend indicator is a simple, easy-to-use but very effective volatility-based trading tool.
The trader should practice with the indicator until they get the best setting and timeframe to apply. If coupled with proper discipline and risk management, the Supertrend indicator can turn a losing trader into a consistent winner without the need for tons of mind-boggling calculations and methods. You should consider whether you can afford to take the high risk of losing money.
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