73 Supertrend

Supertrend is a trend-following indicator based on Average True Range (ATR). The calculation of its single line combines trend detection and volatility. It can be used to detect changes in trend direction and to position stops. The SuperTrend indicator is calculated utilizing the ATR to offset the indicator from the common price. When the price touches the SuperTrend collection it turns to the other direction. One of the advantages of the SuperTrend is definitely that it just moves in direction of the trend.

Figure 9.19: Supertrend function

When the price falls below the indicator curve, it turns red and indicates a downtrend. Conversely, when the price rises above the curve, the indicator turns green and indicates an uptrend. After each close above or below Supertrend, a new trend appears.

Figure 9.20: Supertrend