What it measures

Supertrend is a trailing stop drawn as an indicator: a line a fixed number of average true ranges below price in an uptrend and above it in a downtrend. When price closes through the line, the trend is declared over and the line jumps to the other side. It gives one unambiguous state, long or short, on every bar, which is why so many community strategies are built on it.

The calculation

basic upper = (high + low) / 2 + factor × ATR(length) basic lower = (high + low) / 2 − factor × ATR(length)

The final bands ratchet: the lower band in an uptrend only rises (it is the higher of the new basic lower band and the previous final band), and the upper band in a downtrend only falls. Direction flips when the close crosses the active band, and the Supertrend line is whichever final band is active.

Inputs and defaults

  • Factor: 3 in TradingView's built-in; 2 for a tighter, more active version.
  • ATR length: 10 in the built-in; 14 in many scripts.

How it is read

Line below price, trend up, hold long; line above price, trend down, hold short or stand aside. The flip is the entry and the exit. Strategies add a second Supertrend on a higher timeframe or with a larger factor as a filter, or require ADX to confirm there is a trend to follow.

Where it fails

In a range price crosses the line again and again and every flip is a loss; with the default factor on hourly crypto bars that can be dozens of flips in a sideways month. The ratchet means the line never loosens in a trend, so a sharp pullback in a healthy trend flips it, and the re-entry is at a worse price. It is a good trailing stop and a poor stand-alone signal.

How the desk reads it

The desk reads any Supertrend strategy on its trade count in the sideways months before anything else, and then on how the factor and the ATR length were chosen: a rule that only works at one factor is a rule fitted to its window. Carrying the direction across bars and choosing the price source are details that change the result, and a page that does not state them is incomplete.

In the desk's screen

Of the 614 screened strategies in the library, 37 (6.0%) use this indicator somewhere in their logic.

12 of those were gross-profitable on enough cells to reach the after-fee replay.

The count is read from the compiled code of each strategy in the library; a strategy that computes the indicator by hand under another name is not counted. The desk's own rules are not part of the count.