Supertrend is a trend-following indicator that's extremely popular among Indian traders, especially for intraday trading. It plots a line on the price chart that changes color based on trend direction, making it incredibly easy to read.
Why it's popular in India: Supertrend provides clear buy/sell signals with built-in risk management, making it ideal for both beginners and experienced traders in Indian markets.
How Supertrend Works
Supertrend uses ATR (Average True Range) to calculate dynamic support/resistance levels:
- Green line below price: Uptrend → Consider buying
- Red line above price: Downtrend → Consider selling
Supertrend Calculation
Basic Upper Band = (High + Low) / 2 + (Multiplier × ATR) Basic Lower Band = (High + Low) / 2 - (Multiplier × ATR) Default settings: Period = 10, Multiplier = 3
Trading with Supertrend
Basic Entry/Exit Rules
| Action | Condition | What Happens |
|---|---|---|
| Buy | Price closes above Supertrend | Line turns green |
| Sell | Price closes below Supertrend | Line turns red |
| Stop Loss | Supertrend line itself | Built-in risk management |
Trailing Stop Loss: Many traders use the Supertrend line as a trailing stop. As long as price stays above (for longs) or below (for shorts) the line, the trade continues.
Supertrend Settings
| Setting | Multiplier | Sensitivity | Best For |
|---|---|---|---|
| Aggressive | 2 | High | Catching quick moves |
| Standard | 3 | Medium | Balanced trading |
| Conservative | 4 | Low | Avoiding whipsaws |
Caution: Lower multipliers give more signals but more false signals. Higher multipliers give fewer signals but might enter/exit late.
Why Indian Traders Love It
- Visual clarity: Color-coded signals anyone can follow
- Works on Nifty/Bank Nifty: Performs well on index trading
- Built-in stop loss: The line itself acts as stop loss
- Trend following: Keeps you in profitable trades longer
Combining Supertrend with Other Indicators
For better results, combine Supertrend with:
- RSI: Only buy when RSI is not overbought
- Volume: Confirm breakouts with volume
- SMA 200: Trade in direction of major trend
Using Supertrend in VivaTrades
Test Supertrend strategies on Nifty 50 stocks:
- Entry: Close > Supertrend (line turns green)
- Exit: Close < Supertrend (line turns red)
- With trend filter: Close > Supertrend AND Close > SMA 200