Supertrend Indicator Settings & Strategies to Learn

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Supertrend Indicator Settings & Strategies. Supertrend - a trend indicator that works on the principle of convergence-divergence of moving averages and takes into account volatility. Designed for long-term strategies in combination with Parabolic SAR, MACD confirming indicators.

Traders are always seeking the holy grail - that one perfect indicator that effortlessly identifies the market's trend, never gives false signals, and consistently provides ideal entry and exit points for profitable trades. While there may not be a single indicator that meets all those lofty goals, the Supertrend indicator comes admirably close for those who know how to unlock its potential.

This comprehensive guide will explain everything you need to know about using the Supertrend indicator effectively. We'll start with an overview of how the indicator works and how it is calculated. Then we'll explore some optimal settings when using it on the MetaTrader 4 platform. The article also details several Supertrend trading strategies and provides tips for beginners.

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Key points from the article

  • The Supertrend is a trend-following indicator that takes volatility into account and uses the Average True Range (ATR).

  • It plots bands above and below the price action. When the price touches the band, the direction changes.

  • The indicator can be downloaded for free and added to most trading platforms. Default settings can be configured.

  • Tips for beginners include: trade in direction of longer-term trend and trail stop loss along indicator's lines.

What is a Supertrend Indicator?

A Superfine indicator is a tool that can give a trader precise sell or buy signals in the crypto or any other trading market. Supertrend is a primary trend-following indicator. The indicator works similarly to the moving averages or the moving average convergence divergence. When using the Supertrend indicator, the trend is plotted on prices where the placement indicates the current trend. A Supertrend indicator can work as strong support or resistance. The aspect helps you trail and stop losses during an existing trade.

Supertrend indicator

Supertrend indicator

How Does Supertrend Work?

Traders use indicators to enter or exit trades depending on profitability. Supertrend is among the fundamental technical tools traders utilize to make entry and exit decisions with unique precision. The Supertrend indicator indicates the direction of the price in a trending market. The Supertrend is marked in red and plotted in stock prices charts. The goal is to show investors when there's a dip in prices. The indicator is marked in green when the prices rise.

Supertrend is among the few indicators that can help investors make spot on trade decisions such as buy and sell with remarkable precision. The Supertrend indicator relies on two critical fundamental elements. The first is the values-period, and the second is the multiplier. Further, the indicator also depends on the Average True Range, which is essential in assessing the market volatility value for a range of prices in a given time.

It would be best to calculate the series of the True Range values first, then divide the answer with the number of periods represented by n. The outcome is the value of the current low minus any recent low. To get the moving average, you should find the series TR values. Then divide this value with the number of periods represented by n. The calculation helps you find the moving average of true ranges.

Best Forex Indicators For Successful Trading

Supertrend Indicators Pros and Cons

Like other tools, the Supertrend indicator has its fair share of pros and cons.

👍 Pros of Supertrend Indicator

The Supertrend indicator offers one of the most accurate signals at precise times.

The Supetrend indicator is also accessible on various trading platforms, enhancing its availability.

Using the Supertrend indicator helps the intraday trader make fast and accurate decisions.

Compared to other tools, the Supertrend indicator is easy to use. This makes it a perfect choice for beginners.

👎 Cons of Supertrend Indicator

Not suitable for all market phases. Supertrend indicator is most useful when the markets are trending.

Most useful only when used in conjunction with other indicators. This is the only way to receive filtered signals from the Supertrend indicator.

There are times when the Supertrend indicator captures trends when they have already happened. This means that you can't always follow the Supertrend blindly. It's essential to have a secondary means of filtering the signals.

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Supertrend Formula

Up = (high + low) / 2 + multiplier x ATR

Down = (high + low) / 2 – multiplier x ATR

Supertrend may be calculated using the ATR. The idea is to offset the indicator from the average price. Each time the price touches the Supertrend line, it will turn in the other direction.

Whether you are working on the uptrend or the downtrend, you must first calculate the Average True Range, which is equal to:

[(Prior ATR x 13) + Current TR] / 14

In this calculation, 14 represents a period. The ATR when calculating the Supertrend is the result of multiplying the previous ATR with 13. You can then ass the latest TR, then divide it by the period.

When calculating the Supertrend indicator, the default setting is an ATR of 10 and a multiplier of 3. Since you'll probably be working with different assets, there's no single best parameter. In any case, the ATR observed depends more on the crypto and the period that's on watch.

Supertrend MT4 Settings

Supertrend functions like any other instrument used to conduct technical analysis. Supertrend MT4 comes with built-in parameters. Depending on the trader's trading style, the parameters may be fixed, changed, or configured. You may opt to make it less or more sensitive depending on the exact strategy you intend to use.

There're basic settings or configurations you might use in this case:

  • The indicator comes with a recollection to help with the ATR calculation. This is specifically for the period setting.

  • The ATR calculation is multiplied to offset the price from bands in the factor settings.

  • Smaller settings may lead to a more reactive indicator, which may mean more signals.

  • Higher settings tend to remove the noise from the market, and this may be at the risk of fewer signals

Traders should test all settings before entering the market. One should also ensure that the inherent sensitivity of the indicator suits their trading strategies. It's worth noting that the more sets you change, the greater the chance that your trading system may have an over-optimization effect.

How to Read Supertrend Signals?

Supertrend is a trending indicator. What this means is that the indicator works best in trending markets. Whether the trending markets are uptrends or downtrends, you can still use the buy-sell signal to identify instances where the indicator closes over past the closing price.

The buy-sell signal becomes generatable when the Supertrend closes below the price. If the color changes to green, the Supertrend has closed below the price. This is a buy signal for traders. On the other hand, when the Supertrend moves above the price, the color should turn red. If the Supertrend turns red, this is a signal for the trader to sell.

The straightforward interpretation of the Supertrend makes it easy for beginners in the crypto markets to utilize the indicator. All newbies need to know is the color changes and what each change means. Therefore, you can make informed decisions on when to sell and when to buy. Once you know when to sell and when to purchase using the Supertrend indicator, you can proceed to make bold investment decisions.

Top 3 Supertrend Indicator Strategies To learn

1. Scalping Strategy

The Scalping strategy is a definitive approach that utilizes the traditional approach to trend trading. The strategy is popular in the trading community. The strategy incorporates Up down indicators, exponential moving average 5-period, and MTF Super trend.

Point of Entry and Exit

The best entry and exit point should be between 1 and 15 minutes when scalping. Beyond the 15 minutes frame, you could be trading in unchartered territory.

Signals

When the Supertrend turns green in this strategy, the market bias is bullish. The trader should then go out and look for bullish signals. The up-down indicator in this strategy then begins to change gradually to lime green, an indicator of bullish moments.

Stop Loss

The stop loss should be set at 12 pips for this strategy. You should also set the take profit for this strategy at 25 pips. If you analyze the D1 chart, the TP may be 50 pips.

2. Combining the SuperTrend Indicator with the MACD Oscillator

This strategy allows a trader to combine two different moving averages in a histogram. The strategy also combines layered exponential moving averages allowing the signal lines to show faster.

Point of Entry and Exit

Anywhere between the first day and 6th day of trading would be a perfect time to exit MACD trading with Supertrend. Beyond the 6th day, the bullish divergence patterns will become clear.

Signals

The bullish indicator in this strategy is visible when the MACD line crosses over the signal line from below to above. On the other hand, the indicator is assumed to be bearish when the MACD indicator turns from above to below the signal line.

Stop Loss

When using the MACD strategy, the stop-loss mark is pretty straightforward. You may place the next order above the previous top if you trade short. The strategy allows for an automatic close if you trade short or in case of a lower trade on a long trade.

3. The Parabolic SAR with Supertrend Strategy

The strategy confounds signals from two of the most powerful indicators. A signal is created each time a super trend indicator crosses above the Parabolic SAR.

Signal

Depending on the asset’s moment, the series of dots placed on the graph becomes visible. A small dot appears below the price when there’s an upward value. On the same note, a drop appears above the set price in cases where the trend is downward.

Stop Loss

The Parabolic indicator is among the easiest to use. When the stock is on the rise, a trader should move the stop loss to match the indicator. This should be done after every price bar.

Point of Entry and Exit

When utilizing this strategy, the longer frame is 15 minutes. The lower time frame in this strategy is one minute. This means that traders can use the 15 minutes window to trade.

How to Download and Set-Up Supertrend Indicators for Free

The process of downloading the Supertrend indicator for MTF is easy. You won't need to register anywhere or pay for the software. The tool is free to use, combined with the MetaTrader 4 platform. To download then set up the Supertrend indicator, you only need to complete the following steps.

8 Easy Steps

1

Start by downloading the MTF4 Supertrend indicator. This is accessible for free online.

2

Then proceed to copy the tool from the RAR folder you just downloaded.

3

Next step, paste the tool on the MT4 Directory

4

At this point, you should restart the trading platform.

5

The next phase should be to Go to the charts and the Timeframes. Here, take time to add the indictor and test it.

6

After testing the indicator, proceed to the custom indicators, then click on the Supertrend.

7

At this point, you can attach the tool to your trading chart.

8

You may also configure the default setting if this is a requirement.

With these steps, you can now use the Supertrend indicator for MT4.

Top 3 Tips for Supertrend Beginner-User

There are simple rules you can implore for beginners who may be stuck trying to use the Supertrend Indicator. With these tips, it may be easier for you to detect uptrends and downtrends in the market. It's crucial, however, that you follow the rules to avoid missing the actual signals.

Always trade in the direction of the Longer-term trend

Beginners should ignore the short-term price movements in favor of the longer-term trends. This allows the trader to focus more on the precise fundamental analysis. As a beginner, the long-term trends present more opportunities to sell at a profit.

Enter Long trades each time the short-term signals turn green.

For beginners, this is a perfect strategy. It ensures that schedule entry at the next candle opens, the break of highs, or an entry at the close. Each time the short-term indicator flips backs to long, it's a good indicator that you can enter long trades.

Each time price advances, ensure that you trail the stop loss on the short-term Supertrend line.

An increase in the price moves the trailing stop on the same direction. But the new stop-loss price stays stagnant. It only changes direction when the prices take a dip. This helps protect your downside better as a trader. The profits remain locked as the profits reach new highs.

Best MT4 Broker

A meta quote Software MT4 refers to an electronic trading platform that online retail FX traders often use. The software was released into the market in the year 2005. It was subsequently licensed to other forex exchange brokers who provide the product to traders as third-party distributors.

The MetaTrader4 stands out as the most popular platform for retail forex traders. More than 95% of trading platforms have this option on their websites. The MT4 platform ranks as the best and most complete trading platform today. The platform also has some unique features, including accurate indicators. Traders can now utilize these highly effective MT4 platforms as practical tools in their investment journey. There're several brokers you can consider in the current market. But before deciding on a specific broker, consider the following;

Regulatory Compliance

Ensure that you only work with MT4 brokers who have met all the regulatory standards set out by regulatory bodies.

Check out for Account Features

Every MTF broker incorporates specific account features into their system to enhance delivery. Ensure that you settle for an MT4 broker who incorporates account features that best suit your trading needs. Some factors include; leverage, margin, commissions, and spread when checking out for the best forex broker.

Customer Service

Trading online can be frustrating if customer service support is bogus. You may need to search harder to ensure that you settle for a customer service provider who meets the ideals of proper communication, 24-hour accessibility, and timely resolution of queries.

Suitable Trading Platform

Every MT4 trading broker should have an apt trading platform. The platform should come with all the necessary technical and fundamental analysis tools you might need as a trader. Some of the fundamentals to look out for include demo accounts and back-setting features.

Very few MT4 brokers can meet these high standards of reliability. RoboForex is among the few MT4 brokers who meet these standards. If you are looking for a broker who offers the best conditions for trading on MTF4/MT5, then RoboForex provides the best deals.

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Licenses

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Minimum Deposit

The MTF4 broker sets the minimum deposit for traders at $10. This is among the lowest stakes, making RoboForex a suitable broker for beginners.

Demo Account

RoboForex has an active demo account available with demo contests. This can go a long way in guiding beginners to start trading with the broker. With a demo account a trader is able to make a grounded decision on which options in the market make the best broker.

Spread and Pairing

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Education and Support

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MT4 and MT5 Platform

Few brokers can configure MT4 and MT5 platforms into their systems. RoboForex, on its part, has one of the most robust platforms, including the MT4, MT5, CTrader, and RTrader.

Commissions

RoboForex doesn't charge commission on deposits or withdrawals. The broker covers all the expenses related to the trading process. You, therefore, incur zero commission charges when using this platform.

Team that worked on the article

Oleg Tkachenko
Author and expert at Traders Union

Oleg Tkachenko is an economist-analyst and a risk manager with a practical experience of working in financial institutions for over seven years. Oleg specializes in the analysis of commodities, Forex, stock markets and non-standard investment markets (cryptocurrency, hypes, peer-to-peer lending). He holds a Master’s Degree from the Ukrainian Academy of Banking of the National Bank of Ukraine, Kharkiv Banking Institute. Oleg became an author for Traders Union in 2018; in 2020 he joined the TU’s team of financial experts.

At Traders Union, Oleg is involved in expanded reviews of brokerage companies, and in monitoring the relevancy of the information provided in them. He analyzes trading strategies and indicators, and prepares educational articles on the topic of finance. In addition, Oleg carries out expert research in the Forex and stock markets, and also binary options and cryptocurrency markets. In particular, he checks brokerage companies, studies their performance and growth, tests new services offered by brokers, software and the level of customer support.

Oleg’s motto: Information is a force that opens boundless opportunities, but requires relevancy!

Olga Shendetskaya
Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

Olga’s motto: Do well and you’ll be well!

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.