The Supertrend is a technical indicator that is somewhat unpopular among traders. It was designed – as previously said – by Olivier Sebam to assist traders in identifying trends and determining whether to purchase or sell a financial asset. The indicator is not available as just a default in TradingView or MetaTrader, as with most other platforms. Nonetheless, there are custom-made Supertrend indicators available on the market today.
When the super trend indicator is put to a chart, it is apparent because of the two colors it uses. Even though the colors may be customized, the most common default colors are red and green. When the supertrend indicator is green, it indicates that an item should be purchased, but when it is red, it indicates that an asset should be sold.
Unlike other trending indicators, Supertrend works best in markets that are moving in the same direction as the indicator (i.e., in uptrends and downtrends). There is no such thing as a flawless technical analysis model, and this is true with Supertrend as well, as it occasionally generates misleading signals in sideways trends. Supertrend, on the other hand, generates fewer false signals than a large number of other indicators, but if you’re an intraday trader who wishes to include supertrend indicators into your trading strategy, you should consider including Supertrend in your trading armory.
1.Using an indicator, you may generate buy and sell signals.
Because Supertrend is a trending indicator, it performs well under trending market conditions (both uptrends and downtrends). Identifying the buy-sell signal is simple when the indicator crosses above the closing price of the previous day. Whenever the Super Trend closes just below the price and the color changes from red to green, a buy signal has been created. A sell signal, on the other hand, is generated whenever the Super Trend closes just above price and the color of the Super Trend changes from green to red.
There is no technical indicator that can be relied on to be 100 percent correct, and this is true with Super Trend indicator. As with other indicators, it creates misleading signals when the market is moving sideways; however, the number of false signals is smaller than with other indicators. As a result, you may use Super Trend in conjunction with the other indicators to provide more accurate trade signals.
2.Helps with trading
Because of the nature of the super trend signal, it provides traders with strong support as well as resistance levels from which to enter and exit trades with confidence. Additional indications for establishing stop losses are provided by the system.
Here’s how you can make smart decisions with supertrend.
Whenever the buy signal (green) is activated, for example, and prices begin to decline towards the supertrend indicator, you may enter or go long at about this level, which also serves as a support level. Furthermore, whenever the sell signal is activated, as shown by the color red, price points that are close to or contact the indicator might operate as resistance levels.
What is the optimal level at which to place a stop-loss order? If you have taken a long position, you can place your stop-loss at a level below the green line. If you intend to execute a short position, you should wait until the prices fall below the level shown by the red line before exiting the trade.
3.The timeframe that should be used in the supertrend indicator
Longer periods are typically employed by Swing Traders and Position Holders since they aid in the identification of absolute trade signals following confirmation of trends, allowing them to capitalize on long-term trends while avoiding short-term volatility. The 15-minute chart is the shortest time window that may be utilized. Additionally, you can utilize this supertrend indicator on several periods, putting it on a larger time frame first and then moving it down to a shorter time frame, using it for entry/exit signals on the chart.
4.Making Use of supertrend Indicator
Making use of the Supetrend indicator is a rather straightforward procedure. Indeed, it is among the few indications that can inform you when it is time to purchase or sell a piece of property or stock.
It is critical that you check the chart before using it to verify that it is not ranging. Utilizing it when the market is ranging, as is the case with most supertrend indicators, is not recommended since it will provide a misleading signal. As a result, be certain that the market is either increasing or declining in value.
After you’ve applied the indication, have a look at the color and advice it provides. If it says you should purchase an asset, you must buy it, and vice versa. If it says you should sell an item, you should sell.
Nevertheless, it is always advised that you utilize additional signs to double-check what it is telling you about the situation. Additionally, you should make certain that you do a multi-time assessment since this will inform you whether or not the signal is genuine or invalid.
5.The Relative Strength Index (RSI) and the Supertrend Trading Strategy
When a Supertrend indicator formula is used in conjunction with an RSI indicator, many whipsaws are eliminated, and more accurate buy and sell signals are generated in rapidly changing markets. For charts that are five, ten, or fifteen minutes in duration, use an RSI indicator with such a length of seven.
Ensure you profit with each investment using supertrend.
Plot a Supertrend line with such a period of 5 and a multiplier of 1.5 to represent the current situation. Take a look at the price movement and purchase when the RSI signals buy, as well as a buy signal from the Supertrend, appear within two or three candlesticks of each other. Traders sell when the RSI indicates a sell signal, only with Supertrend confirming the signal within 2 to 3 candles as well as the RSI signal.
Conclusion
As a result of understanding very much about the Supertrend Indicator, one may conclude that it should only be utilized when the market is trending and that there are distinct price uptrends and downtrends.
When the market is going sideways, the supertrend indicator doesn’t really appear to be profitable since it may also generate false signals, which can result in disastrous bets in the long run.
Using this indication in conjunction with other indicators, such as moving averages, is strongly suggested if you wish to apply it in a practical setting.
