Definition
Supertrend
Supertrend is a trend-following indicator that plots a line below price in uptrends and above price in downtrends, using ATR.
Supertrend uses the Average True Range to set a volatility-based band around price. When price closes above the line it flips green (buy) and the line sits below as support; when price closes below it flips red (sell) and the line sits above as resistance. The default settings are a 10-period ATR with a multiplier of 3.
Supertrend is hugely popular among Indian retail and intraday traders on Nifty, Bank Nifty, and stocks because it gives clear, visual buy-sell flips and trailing stops. It works well in trending markets but whipsaws in sideways ones, so traders often filter it with ADX or higher-timeframe trend.
Related terms
- ADXADX (Average Directional Index) measures the strength of a trend, regardless of its direction.
- BreakoutA breakout is when price moves decisively beyond a defined support, resistance, or pattern boundary, often starting a new move.
- TrendlineA trendline is a straight line connecting a series of highs or lows to visualise the direction and slope of a trend.
- Moving AverageA moving average smooths price data over a set period to reveal the underlying trend.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.