The SuperTrend indicator is a popular technical analysis tool used in financial markets to identify the direction of the price trend. It was developed by Olivier Seban, a French author and self-taught trader. The exact date of its creation is not widely documented, but it gained significant popularity among traders in the early 21st century.
The primary purpose of the SuperTrend indicator is to indicate the prevailing trend in the price of an asset and to provide potential entry and exit points. It does this by plotting a line on a chart which follows the current trend. This line is typically colored differently depending on whether the trend is upward (often green) or downward (often red). The SuperTrend combines aspects of trend analysis and volatility, as it uses the Average True Range (ATR) in its calculation, adjusting its sensitivity with market volatility.
Simplicity and Clarity: One of the key advantages of the SuperTrend indicator is its simplicity. The clear visual representation of trend direction makes it easy to interpret, even for novice traders.
Versatility: It can be applied across various time frames and markets, including stocks, forex, and futures, making it versatile for different trading styles.
Effective in Trending Markets: The SuperTrend is particularly effective in strong trending markets, providing clear signals for entry and exits.
Risk Management: It can be used to set trailing stop losses, helping traders manage risk by potentially protecting profits and limiting losses.
Lagging Indicator: Being based on historical price data, the SuperTrend is a lagging indicator. This can lead to delayed signals in rapidly changing markets.
False Signals in Sideways Markets: In markets with low volatility or when the price moves sideways (ranging markets), the SuperTrend can generate false or misleading signals.
No Insights on Price Momentum: The SuperTrend does not provide information about the strength or momentum of the trend, which can be a significant limitation for some trading strategies.
Over-reliance Risk: Traders might become over-reliant on this single indicator, ignoring other important market factors and analysis methods.
The Double SuperTrend indicator enhances the classic SuperTrend indicator's functionality by filtering out countertrend signals and keeping you out of chop. By adding another larger trend filter, it helps to keep you taking trades in the direction of the major trend. This dual analysis allows users to identify and trade in the direction of the major trend, thereby increasing the likelihood of successful trades.
Adjustable Parameters for Minor and Major Trends:
Users can customize both the major and minor trends according to their trading strategy. This includes adjusting the ATR (Average True Range) period and the ATR multiplier for each trend. For the minor trend, the default ATR period is set at 10, and the multiplier at 3.0. For the major trend, the ATR period defaults to 14, with a multiplier of 6.0. These settings allow traders to tailor the sensitivity of the trends to their specific market view or strategy.
Source Selection:
Users can select the data source (such as high/low, open/close) that the SuperTrend calculations are based on, offering further customization.
Signal Visualization and Customization: It plots the major and minor trend lines, with options to display buy/sell signals. These signals are only shown when they align with the major trend, reducing the likelihood of false signals. The minor trend signals are displayed in green (for uptrends) and red (for downtrends), while the major trend lines are shown in blue (for uptrends) and purple (for downtrends). Additionally, users can choose to display or hide these buy/sell signals.
TradingView Custom Alerts: The indicator includes the Pine Script functionality to set custom alerts for buy and sell signals. These alerts are specifically designed to notify users when a signal aligns with the confirmed major trend.
