Strategy library · Trend following
Supertrend strategy: an ATR stop that tells you which side to be on
By Anoop Thomas · Last updated
In short
A Supertrend strategy uses the Supertrend indicator, a line drawn a multiple of ATR above or below price, to set both direction and the stop. Common settings are a 10-period ATR with a multiplier of 3. When price closes above the line it turns green and you go long; when price closes below it turns red and you exit or go short. The line then trails price as your stop.
Supertrend is popular in India for the same reason it is easy to automate: one line that changes colour, and no judgement calls. Under the hood it is an ATR-based trailing stop. In a strong trend it keeps you in and moves the stop up behind you. In a choppy market it flips back and forth, and every flip is a loss plus costs.
It suits traders who want a mechanical trend system with the exit built in. It doesn’t suit very small accounts on index futures, because the distance from price to the line is your risk per unit, and on one Nifty lot that can be a large number (see the example). It also doesn’t predict anything. It reacts.
The rules, step by step
A sensible starting template, not a proven system. Change any number, then test it before trusting it.
- 1
Setup
Supertrend (ATR 10, multiplier 3) on 15-minute candles of a liquid NSE stock or Nifty futures. Trade only between 9:30 am and 3:00 pm.
- 2
Entry
Go long at the next candle’s open after a 15-minute candle closes above the Supertrend line. Go short after a candle closes below it.
- 3
Stop-loss
The Supertrend line is the stop: exit when a 15-minute candle closes on the other side. Also place a hard stop-loss order just beyond the line’s value at entry, in case of a sharp move inside a candle.
- 4
Exit
Exit on the opposite signal (stop and reverse if you trade both sides), and square off everything at 3:10 pm. No overnight positions in this version.
- 5
Position sizing
Quantity = (capital × 1%) ÷ distance from entry to the Supertrend line. If one futures lot exceeds that risk, skip the trade or trade the stock instead.
- 6
Filters
Ignore the first 15-minute candle of the day. Optional: take longs only when the daily Supertrend is also green. Test whether that filter earns its place.
Say it in plain English
Paste this into INDfolio’s AI strategy builder and it becomes a backtestable strategy.
On 15-minute candles of Nifty futures, use Supertrend with ATR period 10 and multiplier 3. Go long when a candle closes above the Supertrend line and short when one closes below, entering at the next candle’s open, only between 9:30 am and 3:00 pm. Exit when a candle closes on the other side of the line and square off everything at 3:10 pm. Size each trade so the distance to the line equals 1% of capital, and skip trades where one lot is too much risk.Backtest this free
Free plan · no card · NSE data included
Same 1% rule, two very different positions
A ₹5 lakh account risking 1% (₹5,000) per trade. Supertrend has just turned green on both charts below. Prices are hypothetical.
| Item | NSE stock | Nifty futures |
|---|---|---|
| Entry | ₹2,450 | 24,000 |
| Supertrend line at entry | ₹2,420 | 23,880 |
| Risk per unit | ₹30 per share | 120 points × 65 = ₹7,800 per lot |
| Size at 1% risk | 166 shares (5,000 ÷ 30) | Less than one lot |
| Position value | ₹4,06,700 | ₹15,60,000 notional per lot |
| Verdict | Fits the 1% rule | One lot risks 1.56%, so skip or add capital |
Hypothetical prices for arithmetic only, not a backtest. Nifty lot size 65 as of 2026; NSE revises lot sizes periodically. The position size calculator handles this for any stop distance.
10 and 3 is a default, not a discovery
The ATR period controls how smoothly the line moves; the multiplier controls how far it sits from price. A bigger multiplier means fewer flips and bigger losses per flip. A smaller one means more flips and smaller losses. 10 and 3 is the default on TradingView and many other charting tools, and 7/3 or 10/2 are common alternatives on intraday charts. None of them is right in general. Test a grid and prefer a setting whose neighbours also hold up.
The Supertrend glossary entry covers how the line is calculated, if you want to check your platform’s version matches.
Where Supertrend loses money
Ranging sessions. When Nifty spends a day inside a 100-point band, a 15-minute Supertrend can flip several times, and each flip exits at the line, which by construction is some distance from the best price. The stop is honest, but the losses add up. Higher-timeframe filters help, and so does not trading the first and last hour. Test those choices rather than adding them because one chart looked bad.
Gaps are the problem for anything held overnight. The line is calculated on closes, so a gap through it fills you at the open, not at the line. The intraday version in the rules avoids this by squaring off at 3:10 pm.
A subtle one in testing: the line’s value can change while a candle is still forming. Make sure your backtest acts only on closed candles, as the rules say, or the results will look cleaner than anything you can actually trade.
Every flip is a round trip
On an intraday stock position of about ₹4 lakh, a round trip costs roughly ₹190 at ₹20-per-order brokerage, with STT of 0.025% on the sell side as the largest piece. On Nifty futures, STT is 0.05% of the sell-side value, about ₹780 per lot at 24,000. Add brokerage, exchange charges, stamp duty and GST and one futures round trip is about ₹930, so five flips in a choppy week cost about ₹4,650 on one lot before slippage.
Testing a Supertrend system on NSE data
Use 15-minute (or finer) candles over several years, and make sure the test fills at the next candle’s open, not at the close that generated the signal. If you test a positional version on Nifty futures, handle the monthly roll explicitly; a stitched continuous contract can hide a price jump at each expiry.
Vary the ATR period (7–14) and the multiplier (2–4), then repeat on hourly and daily candles. If profits only appear at one combination, it is noise. Read the result by year and look hard at the worst losing streak, because trend systems can have long ones and you need to know whether you would sit through it. Monte Carlo simulation reshuffles the trades to show how long that streak could plausibly get. INDfolio can run this on NSE futures and equity history with costs deducted, then paper trade it on live prices before you deploy (we build it, so weigh that accordingly).
Educational content, not investment advice. The rules and numbers on this page are an illustrative template, not a backtest result or a recommendation. Derivatives carry a high risk of loss — SEBI’s own studies of F&O traders found that the large majority of individuals lose money. We build INDfolio AI, so weigh our view accordingly.
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