That said, supertrend is a lagging indicator, so a well-established trend will increase the supertrend indicator performance. This is part of a new series we are calling “Strategy Myth-Busting” where we take open public manual trading strategies and automate them. The goal is to not only validate the authenticity of the claims but to provide an automated version for traders who wish to trade autonomously. Our 12th one is an automated version of the “The Most Powerful Tradingview Buy…
It requires very little tweaking and provides very good results on its default settings, and on different timeframes. While this is the simplest method of how to trade supertrend indicator it doesn’t get any more complicated than that. As such, it will generate false signals when the price is in range (not in a trend). Consequently, you will need to learn what to use with supertrend indicator in combination with to avoid these, which we cover below in our strategies section.
Example scanners and strategies that use SuperTrend Indicator
The indicator gives you an objective trend direction which is dependent on the setting you use. As long as a trader knows the limitation of using any technical tool, the reliability will be determined by how you execute your trading strategy. This powerful trend-following indicator will overlay on your chart like a moving average, and provide actionable buy and sell signals or the current trend direction.
- We then get a flip to a long-trend direction and are looking for long trades.
- Also, you will need to find the best combination with supertrend indicator with another indicator that will help you avoid false signals.
- The midpoint (50) is regarded as the defining boundary, with action above indicating bullishness and below demonstrating bearishness.
- Supertrend is a popular alert indicator that allows you to spot the overall trend of a Forex pair or any other asset.
The SuperTrend Indicator is a technical analysis tool designed by Olivier Seban. It is used to identify market trends and potential entry and exit points in trading. The indicator is based on two dynamic values, period and multiplier, and incorporates the concept of Average True Range (ATR) to measure market volatility. Traders can customize the indicator’s parameters according to their preferences and trading strategies. Its simplicity and adaptability make it an excellent choice for traders of all skill levels. Once you have assessed that the price is trending (up or down), you can start setting up your best supertrend strategy.
Stop Guessing. Start Trading With Confidence!
The ATR can be set anywhere between 10 and 20, while a multiplier of 5 will reduce the number of false signals. When price is above the Supertrend line, the line will turn green to signal bullishness. Conversely, when price is below the Supertrend line, the line will turn red, so the market is considered bearish. One of the first pieces of advice given to new traders is to “trade with the trend.” That’s where a simple yet effective indicator known as Supertrend comes in. Therefore, it has found significant popularity amongst crypto day traders.
- For instance, traders can use it in conjunction with other technical indicators, such as moving averages or oscillators, to confirm entry and exit signals.
- When the line switches from below to above or the vice versa, it means that the trend has ended and is probably reversing.
- One way to use the MACD in a Supertrend indicator strategy is to look for crosses to the upside in the MACD and a green line on the trend indicator.
- It’s a lagging indicator that can be used to develop comprehensive trend-following strategies, assisting traders in spotting reversals and the start of new trends.
- As such, supertrend will inherently help you with setting up precise entry and exit points on your chart.
A higher multiplier will generate fewer entries and false signals, often at the cost of a wider stop. Our platform, its features, capabilities, and market data feeds are provided ‘as-is’ and without warranty. To achieve this, you will need to use the default (10,3) supertrend settings and plot two EMAs, one on the 3 period and one on the 20 period. To make your 1 minute trading strategy crypto even more profitable, you can use the trailing stop order on GoodCrypto. This will allow you to set a loose take profit level and follow the trend until it flips, maximizing your profits without a fixed target. As to answering on what chart does supertrend indicator work the best, you can freely use it on any timeline you think a trend is forming.
Day Trading With Supertrend Indicator
There, you’ll find the Supertrend indicator and dozens of other technical tools waiting for you to use. The default settings for ATR and the multiplier are typically 10 periods and 3, respectively. A shorter ATR will give more weight to recent price action, while a longer ATR will smooth out values. However, changing this value won’t have as much bearing on the indicator as the multiplier.
For instance, MACD and RSI will allow you to confirm the breakout before committing to a trade. While the supertrend indicator best parameters are those provided by default, changing them can be useful in some cases. The SuperTrend Indicator generates buy and sell signals by plotting a line on the price chart. When the price is above the SuperTrend line, it indicates a bullish trend, and traders may consider entering long positions. Conversely, when the price is below the SuperTrend line, it suggests a bearish trend, and traders may consider entering short positions.
Double Supertrend Strategy
Some traders use moving averages, some people use trend lines, others use a combination of those tools or some other indicators. This strategy uses two Supertrends with different settings to reduce the number of false signals. It aligns the more sensitive Supertrend’s signals with a less reactive version while still allowing for relatively tight entries. Some traders may prefer to adjust it to 4, 5, or 6, to account for crypto volatility, although this may lead to a reduced risk/reward ratio. Ultimately, the best settings will depend on market conditions and the crypto asset you’re trading, so it’s wise to experiment to find your optimal configuration.
Using the SuperTrend Indicator for risk management can help traders protect their capital and minimize losses. For example, traders can use the SuperTTrend line as a dynamic stop-loss level, adjusting it according to the market’s movements. When the price crosses the SuperTrend line, traders can close their positions to prevent further losses. This approach enables traders to control their risk exposure while taking advantage of the prevailing market trend. By default, the SuperTrend Indicator uses a multiplier of 3 and a period of 10 for ATR. The ATR period represents the number of days, while the multiplier is the value by which the range is multiplied.
Interpreting the SuperTrend Indicator
Every time there’s a trend reversal, the color of the line changes (green – uptrend, red – downtrend). As such, if you are wondering what is the equivalent to the supertrend indicator, the closest that comes is the simple moving average (SMA). While that answers what is the supertrend indicator, it doesn’t really help you understand how does supertrend work. Choosing a buy and sell indicator for trading crypto can be a humbling endeavor. There’s a vast range of choices of buy sell indicators that can overwhelm even the most experienced traders. However, many of them converge towards the supertrend indicator as the best way to set up the crypto buy and sell signals.