Glossary
Supertrend Indicator: Formula, Settings and Use
Supertrend is a trend-following overlay that plots a single line below price in uptrends and above price in downtrends, using Average True Range (ATR) times a multiplier around the candle's midpoint. Popular settings are ATR length 10 and multiplier 3. On TradingLead, add 'Supertrend' from the chart's Indicators dialog.
Definition
Supertrend is a trend-following indicator drawn directly on the price chart. It shows one line at a time: below price (often green) while the trend is up, and above price (often red) while the trend is down. When price closes through the line, Supertrend "flips" to the other side. Because the line is based on volatility, it widens in volatile markets and tightens in calm ones.
Formula
Supertrend uses the Average True Range (ATR) — the average size of recent candles including gaps.
- Midpoint = (High + Low) ÷ 2
- Basic upper band = Midpoint + Multiplier × ATR(N)
- Basic lower band = Midpoint − Multiplier × ATR(N)
- The bands are "ratcheted": in an uptrend the lower band can only rise, and in a downtrend the upper band can only fall.
- While price closes above the line, Supertrend follows the lower band; when price closes below it, Supertrend switches to the upper band.
Example: with midpoint 1,000, ATR(10) = 10 and multiplier 3, the lower band is 1,000 − 30 = 970. In an uptrend, Supertrend sits at 970 or higher until a close below it.
How traders read it
- Trend direction: line below price = uptrend; line above price = downtrend.
- Flip: a close across the line is read as a possible trend change.
- Trailing stop: many traders use the line as a volatility-based trailing stop level.
- Filter: some only take long setups while Supertrend is green on a higher timeframe.
Common settings
| Setting | Typical value | Effect |
|---|---|---|
| ATR length | 10 (also 7, 14) | Volatility look-back |
| Multiplier (factor) | 3 (also 2, 4) | Lower = more flips, higher = fewer |
Pitfalls
- Sideways markets: frequent flips cause whipsaws and repeated small losses.
- Lag: the flip comes only after price has already moved by several ATRs.
- Forming candle: the current candle can flip and unflip before it closes.
- Gaps: large opening gaps (common after results or global news) can jump straight past the line.
- Over-optimised settings that look perfect on past data often fail on new data.
How to add Supertrend on TradingLead
- Open a chart at tradinglead.in/charts.
- Click Indicators, search Supertrend and click it.
- Open its settings to change the ATR length and factor, and the up/down colours.
To see how Supertrend flips would have played out candle by candle, use bar replay; to simulate a rule built on it, use backtesting. You can also write your own variant in Indicator Studio in Pine (documented v5/v6 subset) or Python.
Educational content only — not investment advice.
Frequently asked questions
- What are the best Supertrend settings?
- There is no single best setting. ATR length 10 with multiplier 3 is the most common default; a smaller multiplier (for example 2) flips more often, a larger one (4) is slower and filters more noise. Test on your instrument and timeframe.
- Is Supertrend popular in India?
- Yes, Supertrend is widely used by Indian traders on Nifty, Bank Nifty and stock charts, especially for intraday and swing trend-following. Popularity does not make it reliable in every market condition.
- Does Supertrend repaint?
- The value on the current, still-forming candle can change until that candle closes. Once a candle has closed, its Supertrend value is fixed. Decide on closed candles to avoid acting on a flip that disappears.
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