Supertrend

Trend

What it measures

Supertrend is a trend-following indicator built on ATR (Average True Range) that plots a single line above or below price to indicate trend direction. When price is above the Supertrend line, it's green (uptrend); when below, it's red (downtrend). It produces rule-based directional readings from volatility-adjusted levels.

How readings are interpreted

The Supertrend line acts as a dynamic support (in uptrend) or resistance (in downtrend). A flip from red to green signals a potential buy; from green to red signals a sell. The default settings (10 period, 3.0 multiplier) work well for daily charts. Higher multiplier = more conservative signals, fewer flips, suitable for position trading.

Conventional levels

Price crosses above Supertrend (line turns green): the trend reading flips bullish
Price crosses below Supertrend (line turns red): the trend reading flips bearish
Price consistently respecting the line as support/resistance: trend strength confirmation
Multiple flips in a short period: characteristic of a choppy market, where the indicator is considered unreliable
ATR multiplier 1.5–2.0: more sensitive, more signals; 3.0–4.0: conservative

Where it works, and where it does not

Excellent in strongly trending markets. In ranging or volatile/choppy markets it flips frequently, generating many false signals. ADX above 20 is the conventional confirmation for a Supertrend signal. Works particularly well on daily charts for swing trading.

Commonly read alongside

ADX: Supertrend flip + ADX > 25 = high-conviction trend signal
RSI: Use RSI to time entries near Supertrend in pullback scenarios
Volume: Volume surge on Supertrend flip = confirmed breakout

Known limitations

In high-volatility periods (earnings, FOMC), Supertrend flips often and unreliably
Lower timeframes (15-min, 1H) produce much lower win rates than daily
Two consecutive opposite signals = choppy market warning — stay flat

In practice

Use the daily Supertrend for direction bias, then use RSI on 4H for precise entry
For crypto: increase multiplier to 4.0–5.0 to account for higher volatility
Track the flip price: if price closes back to where it flipped, it's a false signal
Trail stops using the Supertrend line value as stop level in trending trades

Plot it yourself. Add this indicator to a chart, change every parameter and watch the line move, then backtest how the rule would have behaved on historical data — free on the S&P 500 ETF, no card.

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This is reference material, not advice. It describes what each indicator measures and how its readings are conventionally interpreted. Nothing here is a recommendation to buy or sell anything, and no indicator predicts future prices. GU Analyser is an analytical tool — no money is ever traded here.