Supertrend: Riding the Big Waves
Supertrend is a trend-following indicator that combines Price and Volatility (ATR). It's excellent for trailing stop losses.
How it Works
It plots a line on the chart:
- Green Line (Below Price): Uptrend. Acts as trailing support.
- Red Line (Above Price): Downtrend. Acts as trailing resistance.
Settings
Standard settings are (10, 3).
10 = ATR Period. 3 = Multiplier.
Trading Logic
The Signal
Buy Signal: When price closes ABOVE the Red Supertrend line. It turns Green.
Sell Signal: When price closes BELOW the Green Supertrend line. It turns Red.
Caution
Supertrend works beautifully in Trending Markets.
In Sideways Markets, it creates false signals (whipsaws). Always combine Supertrend with VWAP or
Price Action to filter out choppy days.
*Disclaimer: NSE/BSE frequently revise Lot Sizes and Expiry Days (e.g., SEBI Circulars 2024/2025). Always check the latest circular on nseindia.com before trading.
Standard Disclosure: Investment in securities market are subject to market risks. Read all the related documents carefully before investing. The content provided here is for educational purposes only and does not constitute financial or investment advice. AlgoStraddle Academy is not a SEBI registered investment advisor. Trading options involves high risk and capital can be lost.