Aug 25, 2025
Strategy
Trends tell you where price is most likely to go next. Supertrend turns that idea into a simple line on your chart that changes color with the trend. It is easy to read and it updates with volatility, so you always see a clear path for entries, exits, and risk.
Supertrend is a simple tool that draws one line on your chart. When the market is going up, the line sits under price. When the market is going down, the line sits above price. The line turns green in a bullish phase and red in a bearish phase
The key is volatility. Supertrend uses ATR to measure how much price usually moves. If price moves far enough in the opposite direction, the line switches to the other side and changes color. This switch tells you the trend has turned.
Many traders prefer Supertrend to moving averages. It reacts to changing volatility, so the line adapts when markets speed up or slow down.
You can also use the line to place your stop loss and to move it as price moves. Following the line helps you protect profit when the market goes your way. You do not need complex settings or many indicators. One line can keep you aligned with the dominant move.
ATR means Average True Range. It shows how much price usually moves during one bar. You pick a number of bars, for example 10, and the ATR calculates a smoothed average of those moves so the value is smooth.
ATR = (Previous ATR × (n − 1) + TR) ÷ nn is the number of bars you chose. TR is the true range for the current bar. If n is 10, you add nine parts of the old ATR and one part of the new TR, then divide by 10.
TR is the largest of three values:
today’s high minus today’s low
the absolute difference between today’s high and yesterday’s close
the absolute difference between today's low and yesterday's close
First find the midpoint of the bar: (High + Low) ÷ 2
Upper Band = midpoint + Multiplier × ATR
Lower Band = midpoint − Multiplier × ATR
The Multiplier controls how wide the bands are. A bigger number makes wider bands. A smaller number makes tighter bands.
Default inputs are ATR period 10 and Multiplier 3. When price closes on the other side of the active band, the Supertrend line switches sides and color.
If price closes below the lower band, the line moves above price and turns red. If price closes above the upper band, the line moves below price and turns green. This switch tells you the trend has changed.
Supertrend is not built into MT4 or MT5 by default. You need to add it as a custom indicator. Most versions let you adjust the ATR period and the multiplier. The common default is ATR 10 and Multiplier 3. This blend is steady and works well for trend trades.
Tighter settings such as ATR 7 and Multiplier 2 make the line switch sides more often. That can help scalpers who need fast signals. Wider settings such as ATR 14 and Multiplier 4 make the line smoother and switch sides less often. Swing traders use them to filter noise and hold longer.
TradingView includes Supertrend by default. You can change inputs and colors and save presets for different pairs and time frames. Start with the defaults. Then tweak slightly to match your style, but avoid chasing a perfect setting for every chart.
A switch from red to green is a buy signal. Many traders open a buy when price closes above the green line. A switch from green to red is a sell signal. You can close buys or look for a sell when price closes below the red line
Supertrend can also guide your stop. As long as price stays on the same side of the line, you keep the trade open. If the price closes on the other side of the line, you exit. This keeps the plan simple and helps you stay with the move.
Use Supertrend when the market is trending. In a sideways market it may switch too often and create noise. Combine it with price structure for stronger signals. For buys, look for breakouts and for higher highs and higher lows. For sells, look for lower highs and lower lows. Let the line give the signal, and let structure confirm it.
Basic trend plan. Wait for a color change and a clear break in price structure. For a long, the line turns green and price makes a higher high and a higher low. Enter on the next clean close above the line and exit on the next color change or at a known resistance.
Supertrend with Fibonacci extension. Enter when the color changes in the direction of the new trend. Use the prior swing to draw Fibonacci extensions and set targets. Aim first at 1.272, then reach for 1.618 if momentum stays strong, so your targets and risk-to-reward are defined in advance.
Supertrend with a moving average. Use Supertrend for the signal and a moving average for confirmation. For longs, wait for a green line and price above the moving average like the 50 or the 200. For shorts, wait for a red line and price below the moving average. Trade only when both tools agree and stand aside when they do not.
Look at EURUSD on the daily chart. Price had been falling, then it based and started to firm up. The Supertrend line changed from red to green. That was the first signal to look for a buy.
The entry came on the first clean close above the green line near 1.05. The stop loss went a little below the Supertrend line and the recent swing low around 1.02. This kept risk tied to current volatility and to the structure on the chart.
We drew Fibonacci from the swing low at 1.01766 to the swing high at 1.12087. The 1.272 extension showed a target near 1.14894. That target offered about three to one reward to risk, so the plan was clear before the trade.
Price stayed above the green line as the trend grew. Pullbacks were small and each dip held above Supertrend. You could trail the stop under the line as it climbed and lock in more profit as price advanced.
The move reached the 1.272 extension and hit the target. This example shows the full workflow. Supertrend gives the signal and the stop guide. Structure confirms the direction. Fibonacci sets a realistic target so you know the risk and the reward in advance.
This blend of trend, structure, and measured targets works well for swing trades on liquid pairs.
Stops. Put the stop just beyond the Supertrend line. For a long, the line sits below price, so place the stop a little under it. For a short, the line sits above price, so place the stop a little over it. This keeps risk tied to current volatility.
Take profits. Choose the next swing high or swing low as a first target. You can also use Fibonacci levels from the last impulse, or set a fixed risk-to-reward such as 1 to 2 or 1 to 3. If the trend is strong, trail the stop along the Supertrend line to lock in gains.
Position sizing. Use position sizing based on ATR. When volatility rises, trade smaller. When volatility falls, trade a bit larger. This keeps your risk level consistent even as pairs speed up or slow down.
Supertrend struggles when price moves sideways. The line can switch colors many times and create false signals. It is safer to skip trades when price sits between clear support and resistance.
Supertrend is a lagging tool. It waits for a candle to close beyond its band, which adds safety but can make you late. In quiet sessions ATR gets smaller, so the line tightens, and color changes can come too often.
Because of these limits you should add confirmation. Use market structure, volume, or a second indicator before you act. If they do not agree with Supertrend, do not trade and wait for a better setup.
Use MACD to confirm the signal. MACD above zero supports long ideas, and MACD below zero supports short ideas. This keeps your trades in line with momentum.
Work with support and resistance. A color change near a major level is cleaner than one in the middle of a range. Add simple price action such as pin bars, engulfing candles, or clean breakouts to strengthen the entry.
Filter by time frame. If you trade on the 15 minute chart, also check the 1 hour Supertrend and trade only when both point the same way. Try to confirm color changes with rising volume to avoid weak or fake breakouts.
Supertrend makes trend trading simple. It gives you a clear line, a clean color change, and a natural place for stops and exits. Use it to follow moves that are already in progress rather than trying to catch tops or bottoms.
On its own it can be noisy in ranges, so pair it with structure and one confirmation tool. Keep risk steady and let the line guide your plan. Use Supertrend as one tool, not your entire strategy.
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