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

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.

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For Long Position

When the long position has been recognized, the trader is recommended to hold the position till the price closes below the white 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.

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