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What is Super Trend Indicator and How Does It Work

18 Aug 2023

Introduction 

For intraday traders who need to act quickly for the order placement of their stocks, a super trend indicator can be a good option as it helps in quick technical analysis. This indicator will help decide when to enter or exit positions. Read on to learn more about the concept of super trend indicator.

What is a super trend indicator? 

Super trend indicator connects different time frames ranging from the past three hours to three months to check whether the stock trend will continue. It includes 10 different tools that work as one indicator to monitor 200 stocks all at once. If two or more time frames overlap, it indicates that the trend may continue in the future. 

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How does a super trend indicator work? 

The super trend indicator works on the wave principle, predicting the price movement of stocks. 

  • It monitors the price movements and determines the support and resistance levels of the stocks.
  • The support level is the price level at which the stock gets sold off on reaching a new high point. 
  • The resistance level is the price level, where the stock hits a low point and then again starts rising from a dropped support level. 
  • When the prices move above the support level, buy more positions to gain profit from rising prices. 
  • When the price goes below the resistance level, sell the stocks to prevent losses or further losses. 

What are the parameters of the super trend indicator? 

The super trend indicator depends on two parameters: period and multiplier. To understand how these parameters, affect the working of indicators, traders must know about the Average True Range (ATR). 

  • ATR is the technical indicator that monitors the stocks' volatility. To find ATR of any stock, TR value is needed. 
  • TR = max [(current high - current low)], or Absolute (current high - previous close), or Absolute (current low - previous close) 
  • ATR = [(last ATR x13) + current TR]/14 
  • Ideal setting for a super trend indicator is 3 multipliers and 10 periods. 

Once you get ATR, enter the super trend indicator and choose the periods (number of ATR days) and multiplier. This is how the two parameters and ATR affects super trend indicator. 

What is the formula for a super trend indicator?

Super trend indicator formula  is as follows: 

Upper band = (high + low)/2 + multiplier x ATR

Lower band = (high + low)/2 - multiplier x ATR 

Key Takeaways

A super trend indicator helps traders make smart moves while trading in the stock market. These indicators give precise and reliable insights to gain profit by buying stocks at support levels and selling them at resistance levels.

 

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