Supertrend
Supertrend is an ATR based trailing line that flips between support and resistance as the trend changes. Learn how it is calculated, settings and how to trade it.
Supertrend is a trend following indicator that draws a single line below price in uptrends and above price in downtrends. The distance from price is based on the Average True Range, so the line adapts to volatility: it sits further away in volatile markets and closer in calm ones. When price closes through the line, Supertrend flips to the other side, signalling a change in trend. It is popular for its simplicity and its use as a trailing stop.
How it is calculated#
Basic upper band = (High + Low) ÷ 2 + Multiplier × ATR
Basic lower band = (High + Low) ÷ 2 − Multiplier × ATRThe indicator then applies two rules:
- In an uptrend, Supertrend follows the lower band and only moves up, never down.
- In a downtrend, it follows the upper band and only moves down, never up.
When price closes on the other side of the active line, the trend flips and the indicator switches bands. The common default settings are an ATR period of 10 and a multiplier of 3.
Reading Supertrend#
| Signal | Meaning |
|---|---|
| Line below price (often coloured green) | Uptrend; line acts as dynamic support and a trailing stop |
| Line above price (often coloured red) | Downtrend; line acts as dynamic resistance |
| Flip from above to below | Buy signal |
| Flip from below to above | Sell signal |
Using Supertrend#
As a trailing stop#
Many traders use the Supertrend line as their stop: for a long position, exit on a close below the line. Because it is based on ATR, it gives volatile markets more room and quiet markets less. See Trailing Stop Orders and ATR (Average True Range).
As a trend filter#
Only take long trades when Supertrend is bullish, and shorts when bearish. Combine with entry signals such as pullbacks to support or moving averages.
As an entry signal#
Flips can be traded directly, but they lag: by the time price closes through the line, a good part of the move may have passed. And in sideways markets, flips happen often, producing small losses.
Choosing settings#
| Setting change | Effect |
|---|---|
| Higher multiplier (for example 4) | Line further from price; fewer flips; wider stops |
| Lower multiplier (for example 2) | Line closer; more flips; tighter stops |
| Longer ATR period | Smoother, slower to adapt to volatility changes |
| Shorter ATR period | Adapts faster, more reactive |
Match the settings to your timeframe and holding period. A swing trader on daily charts might use 10 and 3; a day trader might experiment with tighter values on intraday charts.
Supertrend in ranges#
Like Parabolic SAR, Supertrend suffers in sideways markets, where price crosses the line repeatedly. Using an additional filter such as ADX above 20 to 25, or only trading in the direction of a higher timeframe trend, reduces whipsaws. See ADX (Average Directional Index) and Parabolic SAR.
Common mistakes#
- Trading every flip in choppy markets.
- Using very tight settings that flip on normal noise.
- Forgetting that the line only moves in the trend's favour, so a stop based on it can be far away after a sudden reversal.
Another all in one trend tool is the Ichimoku Cloud, which uses several averages of highs and lows to define trend and support.
Frequently asked questions#
What is the Supertrend indicator?#
An ATR based line that trails price, sitting below it in uptrends and above it in downtrends, and flipping when price closes through it.
What are the best Supertrend settings?#
The common default is an ATR period of 10 and a multiplier of 3. Higher multipliers reduce false signals; lower ones react faster.
Is Supertrend better than Parabolic SAR?#
They serve similar purposes. Supertrend adapts to volatility through ATR; Parabolic SAR tightens through acceleration. Each suits different preferences.
Sources#
- Wikipedia, Average true range
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