Best Supertrend Strategy: A Complete Trader’s Guide

Definition

A Supertrend strategy is a simple trend-based trading strategy consisting of a Supertrend indicator and other price action parameters. It uses the ATR indicator and Renko charts to plot a simple buy/sell signal area on the chart to make it easy for forex traders to trade.

In this article, I will explain 3 supertrend indicator strategies that can be used for trading profitably. These strategies consist of supertrend indicator and price action.

3 Major Supertrend trading strategies

A trading strategy consists of a set of rules that are implemented before opening trade to generate profit from forex trading. These rules depend on a trader’s temperament and knowledge. You can also make your strategy by setting different rules with the supertrend indicator to get a higher winning ratio in trading.

Here I have made three supertrend strategies to get a high winning ratio in trading. If these trading strategies do not suit you, you can also follow this method to make your strategy.

3 supertrend strategies are here:

1. Pin bar and supertrend indicator strategy
2. Trendline and supertrend trading strategy
3. Triangle patterns and supertrend strategy

Importance of Supertrend indicator in a Trading Strategy

The main benefit of this indicator is its simplicity. Due to its simplicity, it helps traders to overcome many psychological factors that they face while trading. It needs years of experience to learn trading psychology, but this indicator can solve your problem in minutes.

What is the main issue that traders face? Or which leads to losses in trading?

That is early closing a trade or taking profit too early due to fear of Loss.

Fear is the primary factor.

Traders always close the trade before taking maximum profit due to fear of trade reversal or Loss. That’s why our team has developed this indicator. You need to view the trend of this indicator only instead of candlesticks or market price. When you know that you will have to close the buy trade only when the indicator colour changes from green to red, you will wait without worrying about trade reversal or different market fluctuations. 

Keep in mind that it is not a moving average-based indicator but is based on market volatility over time and it uses Renko chart.

How does the supertrend indicator work?

The supertrend indicator draws a smooth area of red and green colours based on the Renko chart. It will generate buy or sell signals straightforwardly.

There is a straightforward way to identify buy or sell signals.

When the indicator plots a green area, it signals to open a buy trade. When the indicator plots a red area, it signals a sell trade.

Look at the image below for a better understanding of this supertrend indicator.

Supertrend Trading strategy 1

In this strategy, I will make a confluence of candlestick patterns and supertrend indicators to make a perfect and winning trading system.

The rules of this strategy are elementary. We’ll use the candlestick patterns to analyze the market’s direction and then open a buy or sell trade accordingly. For example, if a bullish pin bar forms, we’ll open a buy trade. On the other hand, if a bearish pin bar forms, we’ll open a sell trade.

After opening a trade using a pin bar candlestick pattern, look at the supertrend indicator.

In the case of the Buy trade, wait for the supertrend area to turn its color from green to red. Then close the trade and take the profit from the market.

While if a sell trade is running, wait for the supertrend indicator area to turn red to green. Then close the sell trade and take the profit.

It is a straightforward and effective system. It will work perfectly in the trending market and generate many profits in trending market conditions.

Supertrend Trading strategy 2

This strategy is based on price action and price breakout. Because breakout in trading confirms the trend reversal in the market, the logic behind this strategy is that we’ll have to open a trade on trendline breakout and then grab the maximum profit using the supertrend indicator.

In this trading system, identify a trendline breakout in the sell direction, open a sell trade, and wait for the supertrend area to turn from red to green. Then close the trade.

If you don’t know about the trendline breakout, then kindly read this article for a complete understanding.

For a buy trade setup, open a buy trade just after the trendline breakout in the bullish direction. Then wait for the supertrend area to turn from green to red. Close the trade on change of color and take the profit.

It’s a straightforward system, but it will help you overcome early take-profit psychological problems.

Supertrend Trading strategy 3

I will use the confluence of triangle chart pattern and supertrend indicator in this trading strategy. Triangle chart patterns are most widely used in trading because of the high winning ratio.

For buy trades, first, we’ll find an ascending triangle pattern and then open a buy trade after the breakout. After opening a buy trade, the next step is to look at the supertrend area. When the color of the supertrend indicator changes from green to red, close the buy trade and take the profit.

For sell trades, identify the descending triangle pattern on the price chart. After the bearish breakout of descending triangle pattern, open a sell trade. Then look at the color of the supertrend indicator and close the sell trade when the color changes from red to green.

The bottom line

I have shown the importance of supertrend indicator by explaining three strategies. You can maximize the profit potential of every trading strategy using this indicator. That’s why I highly recommend this indicator for the take profit levels.

In Trending market conditions, you’ll get very high-risk reward trades. That’s why it’s a perfect indicator for every trading strategy. I recommend this indicator to day traders, scalpers and swing traders. It will improve your trading strategy.

Frequently Asked Questions