ST Overview

Supertrend is a trend-following overlay that uses ATR to create a trailing stop-like line that flips between support (below price in uptrends) and resistance (above price in downtrends). When price crosses the Supertrend line, the trend direction flips.

Supertrend is one of the clearest trend indicators: green line below price = uptrend, red line above = downtrend. No ambiguity.

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How Supertrend Works

Core Concept

1. Calculate ATR: Average True Range over n periods
2. Upper Band: (High + Low)/2 + (Multiplier × ATR)
3. Lower Band: (High + Low)/2 - (Multiplier × ATR)
4. Flip Logic: In uptrend, use lower band as Supertrend (support). In downtrend, use upper band (resistance)
5. Trend Change: When price crosses the Supertrend line, direction flips

Key Characteristics:

• Clear Trend Direction = Unambiguous — line is either support or resistance
• ATR-Based = Adapts to volatility automatically
• Trailing Stop Behavior = Acts like a dynamic trailing stop loss
• Two Parameters = Period (ATR lookback) and Multiplier (distance from price)

Visual Interpretation

Supertrend Behavior:

• Green line below price = uptrend (line acts as support)
• Red line above price = downtrend (line acts as resistance)
• Line flips when price crosses it
• Distance from price = ATR × Multiplier

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Trading Signals Available on Reversion

These are the signal names you select when configuring ST in the algorithm builder or via the MCP agent:

Signal	Triggers When	Typical Use
price_above_supertrend	Price is above the Supertrend line	Bullish trend — Supertrend acts as support
price_below_supertrend	Price is below the Supertrend line	Bearish trend — Supertrend acts as resistance

Display: Overlay (on price chart)

Category: Trend

Threshold range: Price-based

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Key Characteristics

Strengths

What Supertrend Does Well:

• Clearest Trend Signal: Unambiguous up/down indication
• Built-in Stop Loss: Acts as dynamic trailing stop
• ATR-Adaptive: Automatically adjusts to volatility
• Simple: Only two parameters

Limitations

What to Watch Out For:

• Whipsaws in Ranges: Frequent flips during consolidation
• Lagging: Signals come after price has already moved
• Multiplier Sensitive: Too low = whipsaws, too high = late signals

Best Use Cases

When to Use Supertrend:

• Trend Following: Use price_above_supertrend for long bias, price_below_supertrend for short
• Dynamic Stop Loss: Use Supertrend level as trailing stop placement

When NOT to Use Supertrend:

• Ranging Markets: Constant flipping produces losses
• Without Trend Confirmation: Add ADX filter

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Note

Pro Tip: Supertrend’s most powerful use is as a dynamic trailing stop. Enter trades using other indicators (RSI, MACD) and use the Supertrend level as your stop loss — it automatically trails price with volatility-adjusted distance, protecting profits while giving the trade room to breathe.