Supertrend

Supertrend is a trend-following indicator, built on the Average True Range (ATR), that plots a single line below price during uptrends and above price during downtrends — flipping sides when price closes across it. Because ATR measures volatility, the line sits further from price in volatile phases and hugs it in quiet ones, adapting the buffer automatically.

It takes two parameters: the ATR period and a multiplier, with (10, 3) as the common default. The line is computed from the price midpoint ± multiplier × ATR, ratcheting so it only tightens in the trade’s favour — which is why many traders also use it as a trailing stop.

Example

On a 15-minute BANKNIFTY chart with Supertrend (10, 3), the line flips below price at 56,400 — a buy signal. The system goes long and stays in while candles close above the rising line. Eleven bars later, price closes below the line at 56,860 and the position exits: 460 points, about 460 × 35 = ₹16,100 on one futures lot before costs. Hypothetical — the same settings in a sideways market produce repeated flip-flops, each a small loss, and whipsaw losses are Supertrend’s characteristic cost.

Why it matters

Supertrend is popular in Indian intraday systems because it compresses trend direction, entry, and trailing exit into one unambiguous rule — ideal for automation, with no subjective reading. Its weakness is equally definite: it needs trends, and a year’s profit can come from a handful of trending weeks. Backtesting across choppy and trending periods — and resisting the urge to tune the multiplier to perfection — is what separates use from overfitting.

In INDfolio AI, Supertrend rules can be combined with filters and tested on NSE history — see Backtesting.