Hello traders! Supertrend indicator is one
of the most used indicators by new traders. Because it is easy to read and it fixes a
major concern of new traders, which is entries. Supertrend indicator is a really popular indicator
because it gives entry signals, and people believe it is profitable. But I can guarantee
you that, if you follow this indicator by itself, you are most likely to lose money
in the long run. Don’t worry if I sounded too pessimistic. In today’s video, I will
show you 2 really simple strategies, that you can use the super trend indicator, and
still be profitable. It is the trading journal channel, and please don’t forget to like
and subscribe for more trading videos. If you are new to trading, supertrend indicator
can be really helpful to you. Because it both shows you the direction of the trend, and
when you should open a trade. Since it is really simple to use, it is one of the best
indicators for new traders. Supertrend indicator is a trend following indicator as you can
understand from its name. But it also uses the ATR, which is the Average True Range.
And, since it uses the ATR, it generates entries based on the volatility, in addition to momentum.
Before revealing 2 highly profitable strategies that you can use with the supertrend indicator,
I want to show you the basic trading strategy of this indicator. Actually, it is extremely
simple, but if you are totally new to trading, you must understand this strategy first.
First of all, We will open our charting software and add the super trend indicator on the screen.
I use tradingview.com, but you can use any other platform that you are comfortable with.
I will go to the top bar, and open the indicators icon here. And I will search for the super
trend indicator. Now, you can see the indicator on your chart.
As you see, there are 2 zones on the chart: the green zone, and the red one. If the zone
is green, it means an uptrend. And it means a downtrend, if the zone is red. And you can
see the entry signals too. Actually, it is really simple logic. You go long when the
zone turns green, and you go short, when the zone is red. You can see that the entry points
are written on the indicator. Your stop-loss points will be the lines. There is not much
to explain on this strategy, since it is so easy to read.
This was the classic strategy to use with the supertrend indicator. But, as I told you,
it won’t be profitable by itself. So, we will modify this strategy and create 2 profitable
strategies that you can trade with confidence. The main problem with the super trend indicator
is, it gives lots of entry signals. It is really profitable in trending markets, but
if the market moves sideways, it doesn’t work at all. And as a trader, you must know
that, the market isn’t trending every second. So, you should have a b-plan for the times,
when the market is in a range. So we have to find a way to filter out these
range markets. If you follow my channel, and have watched my all videos, you might guess
a way to do it. Since we use it quite often with many indicators.
The easiest way to filter the trending markets is to use moving averages. I know it sounds
too simple, but if you watched my old videos, we use it quite often to filter markets. So,
I will add the E.M.A., which is the exponential moving average, to our chart. The exponential
moving average is just like the simple moving average, but it gives more weight to the recent
data. We will click the settings tab here and change the length to 200.
So our first strategy is super trend indicator, combined with the 200-period E.M.A..
It is a super simple strategy also, but it has a way higher winning rate comparing to
the supertrend indicator alone by itself. The reason for that is really simple, 200-period
moving average determines the long-term trend, while the supertrend indicator determines
the short-term trend. So we will only open a position, if the short-term trend is in
the same direction as the long-term trend. We will use the super trend indicator with
its regular settings in this strategy. We will go long only if the buy signal comes
above the 200 E.M.A., and we will only look to go short if the price is below the E.M.A..
That means, we will only take buy signals, when price is above the moving average, and
skip the sell signals. And we will do the opposite, if the price is below the average.
That way, we will try to skip the false signals that the supertrend indicator gives regularly.
Because we will be trading in the same direction as the trend.
Let me give you an example. You can see that, the indicator gives a sell signal here, but
should we open a short position here? The answer is no. Because the price is still
above the moving average. We should wait until the price moves below the 200 E.M.A., and
we will open a sell position at the first candle that opens below the moving average.
At first, I will put my stop-loss at the supertrend line, and we will move our stop-loss while
following the trend. That way, you can ride a trend risk-free. We will close our position
when the price touches our stop-loss, or when the supertrend indicator changes color.
The color of the supertrend indicator changes here, and there is a buy signal as well. But
we should not take the trade here. Because the price is still below the moving average.
So, we will wait until the price is above the E.M.A. and when we see a candle that opens
above the E.M.A. line, we will open a long position.
Even if this strategy is so simple, it has a way higher winning rate comparing with the
trading supertrend indicator alone. I think it is enough for this strategy, since it is
so simple, there is not much to explain. Let’s move to our next strategy.
Our second strategy is a little more complicated than that. But it is more profitable according
to my experience. This time, we are going to do something weird, and we are going to
add 3 supertrend indicators on our chart, and get rid of the exponential moving average.
I know the chart looks like a mess right now, but don’t worry. We will take care of that
in a second. We will make some adjustments before starting to trade. We have to adjust
the setting before trading, otherwise, it would be meaningless to add 3 supertrend indicators.
First, I will make some style changes, so our chart will be cleaner. I will close the
buy and sell signals, and also the buy and sell highlights. We will apply this change
to all of the indicators. We will also change the inputs of indicators. For the first indicator,
I will change the period to 12 and the multiplier to 3. I will repeat this change with different
numbers for the other two indicators as well. For the second indicator, the period will
be 11, and the multiplier will be 2. And, for the last one, they will be 10, and 1 respectively.
Don’t worry if you are lost, I will explain the strategy in examples. The main goal of
this strategy is really simple. We will only open positions when all of the lines turn
the same color. First, let’s look at a short setup.
Here you can see that one of the supertrend lines changes into red, but it is not enough
for us to open a trade. As I told you, we will wait until all of the lines turn into
the same color. Here, all of the lines are turning into the same color, so we will open
a position there. The supertrend line in the middle, will be our stop loss point. You have
multiple choices to exit this trade. You can aim for two times higher than your stop-loss,
as a take profit target. Or, you can move your stop loss and take profit points, and
exit the strategy, when one or two lines change color. Depending on your risk tolerance. Personally,
I move my stop loss and take profit targets, since I enjoy riding the trend risk-free.
And I exit as soon as my stop loss is hit, or two lines change color.
Now let’s move on to a long setup. The same rules apply in long positions also. Here you
can see that one of the lines changes color, and then the next one. But we will not open
this position since the next candle doesn’t turn green. We will wait until all of the
lines turn green, which is here. We will open a position at the candle that all of the lines
turn green. Just like the short setup, the middle line will be our stop loss point. And
we can set our take profit level at two times higher than our stop-loss. Or we can ride
the trend risk free, while moving our stop-loss at each candle opened.
I hope with the examples, you have a better understanding of how to trade the supertrend
indicator. Please don’t forget to backtest these strategies
before trading them. You should never trust a strategy before testing it yourself. You
should never trust a strategy, you see online, just because a trading mentor tells you it
is good to go. And you can improve your strategies while testing them. Because sooner or later
you will start to see some patterns. I hope that I could explain the strategy well,
and you understood it perfectly, but if you have any questions, feel free to shoot them
up in the comments. Please leave a thumbs up if you find this video useful. And please
feel free to share your trading results with me.
I hope that I could explain the strategy well, and you understood it perfectly, but if you
have any questions, feel free to shoot them up in the comments. Please leave a thumbs
up if you find this video useful. And please feel free to share your trading results with
me. Have a fantastic and profitable day!
