What Is the Supertrend Indicator? Settings and How to Trade It

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The Supertrend indicator is a trend-following overlay that plots a single line above or below price. The line sits a set multiple of the average true range (ATR) away from each bar’s midpoint, and it only moves in the direction of the current trend. When price closes on the other side of the line, the indicator flips. The line jumps to the opposite side of price, and its color changes, usually green for an uptrend and red for a downtrend. Olivier Seban developed it in 2009, and most charting platforms now include it as a built-in study.

How the Supertrend Indicator Works

Supertrend treats volatility as the measure of how much room a trend needs. The ATR averages how far price typically travels per bar, gaps included. Multiplying it by the chosen factor gives a buffer that widens in turbulent markets and narrows in quiet ones. That buffer is placed above and below the bar’s midpoint to create two candidate bands, and only one of them is displayed at any time.

• In an uptrend, the indicator shows the lower band beneath price. This line acts as dynamic support and a trailing stop.
• In a downtrend, it shows the upper band above price, acting as dynamic resistance.

The key mechanic is the ratchet. During an uptrend, if a new bar’s calculated lower band is higher than the previous line, the line moves up. If it is lower, the line stays where it was. Price can pull back toward the line without dragging it down. Only a close below the line ends the uptrend. At that point the indicator switches to the upper band, which is usually far above the last support level. Downtrends mirror this: the upper band can fall or stay flat, never rise, until a close above it.

Interpreting the Supertrend Indicator

Reading the indicator comes down to three things:

1. Line position relative to price. A green line below price is a bullish reading. A red line above price is a bearish reading.
2. The flip. The bar on which price closes through the line and the color changes is the signal. Red to green is a potential buy signal, and green to red is a potential sell signal.
3. Distance between price and line. A wide gap means price has run well ahead of its volatility-based stop. A narrow gap means a small adverse move could trigger a flip.

Platform conditions follow the same logic. An expression such as “Supertrend(7, 3) < close” means the Supertrend value with a 7-bar ATR and a multiplier of 3 is below the latest close. In other words, the indicator is in its bullish state on that bar.

A “break” of Supertrend resistance is a close above the red line, the same event as a flip to an uptrend. The line marks where the downtrend reading would end, not a level where buyers and sellers have historically met.

The Supertrend Formula

Platforms calculate Supertrend automatically, but the full calculation explains why the line behaves as it does and why two platforms can show slightly different values.

Step 1: True Range and ATR

The true range (TR) for each bar is the largest of:

• Current high minus current low
• The absolute value of current high minus previous close
• The absolute value of current low minus previous close

The first ATR value is the simple average of TR over the first n bars. After that, J. Welles Wilder’s smoothing is the standard method:

ATR = [(Previous ATR × (n − 1)) + Current TR] / n

Some platforms or custom scripts offer a simple moving average of TR instead. This is one reason the same settings can produce slightly different lines on different software.

Step 2: Basic Upper and Lower Bands

Basic upper band = (High + Low) / 2 + (Multiplier × ATR)

Basic lower band = (High + Low) / 2 − (Multiplier × ATR)

The multiplier is a constant. Whole numbers are typical, but decimal values such as 2.5 or 3.5 work the same way.

Step 3: Final Bands (the Ratchet)

The basic bands move every bar. The final bands apply the trend-holding rule:

• Final upper band = the basic upper band if it is below the previous final upper band, or if the previous close was above the previous final upper band. Otherwise it keeps the previous final upper band.
• Final lower band = the basic lower band if it is above the previous final lower band, or if the previous close was below the previous final lower band. Otherwise it keeps the previous final lower band.

Step 4: The Supertrend Line

• If the indicator was in an uptrend and the current close stays at or above the final lower band, Supertrend equals the final lower band.
• If the current close falls below the final lower band, the trend flips down, and Supertrend equals the final upper band.
• The downtrend rules are the mirror image, with a close above the final upper band flipping the trend up.

The standard calculation uses closing prices for the flip. An intrabar spike through the line does not change the reading unless the bar closes beyond it.

Example of the Supertrend Indicator

This is a hypothetical four-bar example on a currency pair, using a multiplier of 3. ATR values are given rather than derived, to keep the focus on the band logic. Assume the indicator starts the sequence in an uptrend.

Bar 1: High 1.1050, Low 1.0990, Close 1.1040, ATR 0.0040

• Midpoint = 1.1020; 3 × ATR = 0.0120
• Basic upper = 1.1140; basic lower = 1.0900
• These are the starting final bands. Uptrend, so Supertrend = 1.0900

Bar 2: High 1.1090, Low 1.1030, Close 1.1080, ATR 0.0042

• Midpoint = 1.1060; 3 × ATR = 0.0126
• Basic lower = 1.0934, which is above 1.0900, so the final lower band rises to 1.0934
• Basic upper = 1.1186 is not below 1.1140, so the final upper band stays at 1.1140
• Close is above 1.0934: Supertrend = 1.0934 (the line stepped up)

Bar 3: High 1.1085, Low 1.1005, Close 1.1015, ATR 0.0045

• Midpoint = 1.1045; 3 × ATR = 0.0135
• Basic lower = 1.0910, below 1.0934, and the previous close was above the line, so the final lower band stays at 1.0934
• Basic upper = 1.1180; the final upper band stays at 1.1140
• Close 1.1015 is still above 1.0934: Supertrend = 1.0934 (the line stays flat even though price dropped 65 pips on the close)

Bar 4: High 1.1010, Low 1.0900, Close 1.0915, ATR 0.0050

• Midpoint = 1.0955; 3 × ATR = 0.0150
• Basic upper = 1.1105, which is below 1.1140, so the final upper band drops to 1.1105
• Close 1.0915 is below the final lower band of 1.0934: the trend flips down, and Supertrend = 1.1105

On bar 3 the ratchet held the stop in place while price pulled back. On bar 4 the line jumped 171 pips, from 1.0934 below price to 1.1105 above it. A trader who reverses from long to short on every flip takes the new short with a reference stop 190 pips above the close, far wider than the stop the long position had.

Supertrend Indicator Settings

Settings appear as two inputs, often labeled “ATR Period” (or “ATR Length”) and “Multiplier” (or “Factor”). The factor is the number of ATRs between the bar midpoint and the band. Each input changes the line differently:

• ATR period changes how quickly the volatility estimate reacts. A short period lets one volatile bar widen or narrow the bands sharply. A long period smooths volatility over more bars.
• Multiplier changes the distance directly. Raising it from 3 to 3.5 pushes each band about 17% further from the midpoint, so price needs a larger counter-move to cause a flip.

Short-term traders tend to favor tighter settings and longer-term traders wider ones, but no setting is correct across all markets. A pair or stock that moves in large, choppy swings may need a wider multiplier than a smooth-trending one on the same timeframe. Tuning settings until they fit past data can also produce parameters that only describe the history you tested. A demo account or a paper trading simulator shows how often settings flip in real conditions before money is at stake.

Why Supertrend Differs Across Timeframes

Supertrend applies to forex, stocks, commodities, indexes and crypto on any timeframe, but it is calculated from the bars on the chart. A daily chart uses daily highs, lows and ATR, and a 15-minute chart uses 15-minute bars. The same (10, 3) setting therefore produces different signals on each timeframe, and they can disagree: a daily uptrend can contain several intraday downtrend flips. Shorter timeframes carry more noise relative to the ATR buffer, so their flips are more often reversed by the next move. Many analysts treat daily or weekly readings as the more dependable trend filter for this reason.

How to Trade With the Supertrend Indicator

Entries on the Flip

The basic Supertrend strategy is to buy when the line flips from red to green and sell or go short when it flips from green to red. Because the flip is confirmed only at the bar’s close, the entry normally comes at the close of the signal bar or the open of the next one. A flip seen mid-bar may disappear by the close.

Used in a stop-and-reverse style, the strategy is always in the market. Many traders instead use only flips in one direction, for example taking long signals only when a higher-timeframe trend is up.

Stop-Loss and Trailing Stop

The line works as a ready-made stop:

• Long positions: place the stop at or slightly below the green line.
• Short positions: place the stop at or slightly above the red line.

Because the line ratchets with the trend, moving the stop to the new line each bar turns it into a trailing stop that locks in more of the move as the trend extends. A buffer beyond the line accounts for the fact that the indicator flips on closes while a broker’s stop order triggers on any trade or quote at that price.

Position Sizing From the Line

The distance between entry and the Supertrend line defines the risk per unit, which makes position size a calculation rather than a guess. A hypothetical example, assuming a USD account trading EUR/USD, where one pip on a standard lot is worth $10:

• Account balance: $10,000; risk per trade: 1% = $100
• Entry: 1.1080; stop at the Supertrend line: 1.0934 (146 pips)
• Position size = $100 / (146 pips × $10) ≈ 0.068 lots, rounded down to 0.06 lots

Spread, commission and possible slippage on the stop add to the actual loss. The position size calculator handles the pip value for other pairs and account currencies.

Trend Filter and Asset Allocation

Some traders do not trade the flips at all. They use the Supertrend state on a higher timeframe as a filter, taking only long setups from other methods while it is green. Applied to sector or asset-class charts, the same filter can flag which markets are trending up, as one input into allocation decisions.

Combining Supertrend With Other Indicators

Pairing Supertrend with tools that cover its lag, its weakness in ranges and its lack of a strength reading is the usual approach:

• Trend strength: the average directional index (ADX) measures whether a trend is strong enough to follow. A low ADX reading alongside a Supertrend flip warns of a range.
• Momentum: the Relative Strength Index (RSI) or the stochastic oscillator can show whether a move is stretched. MACD crossovers can confirm a flip’s direction.
• Moving averages: a longer exponential moving average acts as a broader trend filter, for example acting only on long flips above the 200-period EMA.
• Intraday levels and volume: short-term traders often check VWAP and volume to judge whether a flip has participation behind it.
• Price levels: Fibonacci retracements, Bollinger Bands and the Ichimoku Cloud can add context about where a flip occurs relative to support, resistance or volatility extremes.

Each added filter removes some signals, including some good ones. Requiring several confirmations reduces whipsaws but also delays entries that are already late by design.

Supertrend vs. Similar Indicators

• ATR itself: ATR is a volatility reading with no direction. Supertrend uses ATR as an input and adds direction and a price level.
• Moving averages: a moving average follows price in both directions. Supertrend’s line cannot move against the current trend, and it switches sides of price on a reversal.
• Keltner Channels: these also use ATR bands, but around an EMA, and both bands are always shown. Supertrend shows one band and holds it flat until a flip.
• Chandelier Exit: this ATR-based trailing stop is measured from the highest high (or lowest low) over a lookback period, not from the bar midpoint.
• Parabolic SAR: also a stop-and-reverse overlay, but it uses an acceleration factor that speeds the stop toward price over time instead of volatility bands.
• Branded variants: indicators sold or shared under names such as “Supertrend Pro” or “Magic Trend” are custom scripts. Their formulas and repainting behavior depend on how they were coded and may differ from the standard calculation.

Limitations of the Supertrend Indicator

• Lag: a flip arrives only after price has moved at least the ATR buffer from its recent position, so entries and exits give back part of each move.
• Whipsaws in ranges: in sideways or choppy markets, price crosses the line back and forth, producing a series of small losses as positions are stopped out and reversed.
• No strength or magnitude: the indicator gives direction only, with no overbought or oversold reading and no estimate of how far a trend may run.
• Settings sensitivity: tight settings make the line noisy and loose settings make it slow. The right balance differs by asset and timeframe.
• Large stop jumps on reversals: as in the worked example, the new line after a flip can be far from price, which forces small position sizes or a wider stop.
• Gaps: when price gaps through the line, as on weekend opens in forex or overnight in stocks, the fill on a stop order can be well beyond the line.
• Past behavior is not a forecast: a setting that tracked previous trends well can fail when market conditions change.

FAQs

The Bottom Line

Supertrend suits traders who want a simple trend reading and a ready-made trailing stop in markets that hold sustained trends. In sideways markets it produces repeated whipsaws, and its flips arrive late by design. Settings need testing on the specific asset and timeframe, ideally on a demo account, and pairing the line with ADX or a longer moving average helps screen out signals in ranges.