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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

SuperTrend – A trend-following indicator to use in your trading strategies

Find out what is SuperTrend and how to apply the technical indicator onto your trading.

SuperTrend is a technical indicator that allows you to identify trends and provides you with both buy and sell signals. It may be applied across different timeframes (i.e. 5 minutes, hourly, daily), although you may note that a smaller timeframe may lead to a higher frequency of signals being generated. It usually alternates between two colours: green or red, indicating whether the trend is tilted to the upside or downside respectively. A buy signal is generated when the SuperTrend is plotted below the closing price and the colour switches from red to green. Conversely, a sell signal is generated when the SuperTrend is plotted above the closing price and the colour switches from green to red.

For example, if you want to take up a long position in Alphabet, the SuperTrend has signalled an entry point to long the stock in April last year, when the line switches from red to green. It then signalled an exit in September, when some weakness in Alphabet’s share price was observed. Thereafter, it provided another entry point to long the stock in October last year and has not signalled any exit thus far.

The parameters for the indicator consist of a time period and multiplier. The default setting for IG platform is a period of 14 and multiplier of 3. Generally, the indicator takes market volatility into consideration when calculating its value and hence, the time period is mainly used for its average true range (ATR) calculation. Changing to a shorter period may then produce more trading signals. On the other hand, multiplying the ATR and the multiplier factor, may determine how sensitive the indicator is. Likewise, a lower multiplier factor may lead to more trading signals.

The advantages of the SuperTrend are that it is easy to use and provides buy and sell signals for traders. It can also be applied across multiple timeframes and different asset classes to identify trends. An important point to note, however, is that the indicator performs best in a trending market and may not work as well for sideways markets, which have a higher tendency to produce false signals.

How to add SuperTrend in IG platform

To add the SuperTrend onto your charts, you can do a simple right-click and head over to the option called ‘Indicators’. Under the list of technical indicators shown, you will be able to find ‘SuperTrend’ and selecting it will automatically incorporate the indicator onto your selected chart.

Disclaimer: Our indicators do not constitute and shouldn't be regarded as investment advice. IG provides an execution only service. You act on indicators entirely at your own risk.

Publication date : 2021-07-30T04:17:14+0100

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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