Supertrend Indicator: Formula, Settings and How to Use It

The Supertrend indicator is a trend-following line plotted on the price chart. It sits below price and turns green while the trend is up, and above price and turns red while the trend is down; the moment price closes through it, the line flips sides and the colour changes. Developed by Olivier Seban, it is built entirely from the Average True Range (ATR), so the line keeps a volatility-adjusted distance from price: wider when the market is swinging hard, tighter when it is quiet.

That is the whole idea. The rest of this guide is how it is calculated, how to set it, where it goes wrong, and what happened when we ran it across the S&P 500 and Nasdaq 100.

How the Supertrend is calculated

Supertrend takes two inputs: an ATR period (n) and a multiplier (m). The calculation runs bar by bar in four steps.

1. True Range and ATR. The True Range of a bar is the largest of three distances:

The ATR is an n-period moving average of TR. Most charting platforms, TradingView included, use Wilder's smoothing for it.

2. Basic bands. Both bands are centred on the bar's midpoint, hl2 = (high + low) / 2:

3. Final bands — the ratchet. This is the step most explanations skip, and it is what makes Supertrend a trailing line rather than a pair of envelopes:

• The final lower band may only rise. It takes the new basic lower band if that is higher than the previous final lower band, or if the previous close fell below the previous final lower band; otherwise it keeps its previous value.
• The final upper band may only fall. It takes the new basic upper band if that is lower than the previous final upper band, or if the previous close rose above the previous final upper band; otherwise it keeps its previous value.

4. The Supertrend line. In an uptrend the Supertrend is the final lower band. When a close falls below it, the trend flips to down and the Supertrend becomes the final upper band, until a close rises above that, and so on.

A worked example

Take a bar with a high of 105, a low of 99, an ATR of 2.5, and the common 3× multiplier.

• hl2 = (105 + 99) / 2 = 102
• basic upper band = 102 + 3 × 2.5 = 109.5
• basic lower band = 102 − 3 × 2.5 = 94.5

If the stock is in an uptrend and the previous final lower band was 95.2, the new basic lower band (94.5) is lower, so the line stays at 95.2 — the ratchet does not let it fall. A close below 95.2 on a later bar would flip the trend to down and move the line above price.

Supertrend settings: ATR period and multiplier

The default on most platforms is an ATR period of 10 and a multiplier of 3. Other common pairs are 7 and 3 for a faster line, and 10 and 2 or 14 and 3 for variations on the same theme.

The two parameters are usually described as equal partners. They are not:

• The multiplier sets how far the line sits from price, and therefore how big a move it takes to flip it. A lower multiplier hugs price and flips often; a higher one gives the trend room and flips rarely.
• The ATR period only changes how quickly the volatility estimate adapts.

When we measured both on daily bars, moving the multiplier changed the number of signals several times more than moving the ATR period did. Our Supertrend calculator puts different settings side by side on real charts, so you can see the trade-off for yourself before choosing.

What are the best Supertrend settings? There is no single answer, because "best" depends on what you want from the line. A tight setting catches turns earlier but whipsaws more in a range; a loose one survives pullbacks but gives back more of the move before it flips. Pick the multiplier for the swings you are willing to sit through, then check the flip count on the charts you actually trade.

How to read Supertrend buy and sell signals

• Buy signal: a close above the red line flips it below price and green.
• Sell signal: a close below the green line flips it above price and red.
• While the trend holds, the line works as a trailing stop. A long position stays open while price is above the green line; a close below it is the exit.

Because the line only ratchets in the direction of the trend, it also marks a dynamic support level in an uptrend and resistance in a downtrend. Pullbacks that approach the line without closing through it are where trend followers tend to look for entries.

Does Supertrend repaint?

Not on closed bars. Supertrend is calculated from each bar's completed high, low and close, so once a bar has closed its value and its signal are fixed. What does change is the current, still-forming bar: intraday, price can cross the line and back, so a flip that shows mid-session may disappear by the close. Treat a signal as real only once the bar has closed.

Is Supertrend a lagging indicator?

Yes. It is built from past prices and an average of past volatility, and it only flips after price has already closed through the line, so it always confirms a turn after the turn has started. That is the price of its main strength — it ignores small wiggles — and the reason it struggles in sideways markets, where price can cross the line repeatedly without a trend developing.

Supertrend with ADX

Because Supertrend's weakness is sideways markets, the most useful companion is something that measures whether a trend exists at all. The Average Directional Index (ADX) does exactly that: it measures trend strength regardless of direction, and readings above about 25 are conventionally taken to mean a trend is in place.

This is the combination our scanner runs. It uses an ATR period of 10, a multiplier of 3 and a 14-period ADX, and flags a session when ADX rises from below 25 to above 25. Price above the Supertrend line labels the event bullish; price below labels it bearish. A Supertrend flip on the same day is not required — the event is "a trend just gained strength", not "the line just changed colour". The latest events are on the Supertrend + ADX screener.

How has Supertrend actually performed?

We score every signal we detect against SPY over the following 5, 20 and 60 trading days. In our audit of 1,643 of our own pattern calls, bullish trend-following signals were the weakest family we measured, while the bearish side held up considerably better — a result you only get from counting, not from the textbook.

The live numbers for each side, with sample sizes, are on the bullish Supertrend and bearish Supertrend pages. Treat them as context rather than an edge: the scoring compares returns with SPY and ignores costs, slippage and position sizing.

Limitations

• Sideways markets produce whipsaws: repeated flips with no follow-through.
• Gaps can move price far through the line before the flip registers, so the exit can be well below the stop the line implied.
• One setting does not fit every stock. A multiplier that suits a quiet utility will flip constantly on a volatile growth stock.
• It says nothing about why the trend exists. Use it to manage a position or confirm a direction, alongside other analysis — our guide to technical analysis covers the rest of the toolkit.

Frequently asked questions

What is the Supertrend indicator?

A trend-following line built from the Average True Range. It sits below price and turns green in an uptrend, above price and turns red in a downtrend, and flips when price closes through it.

What is the Supertrend formula?

The bands are hl2 ± multiplier × ATR, where hl2 is the bar's (high + low) / 2. The lower band may only rise and the upper band may only fall; the Supertrend follows the lower band in an uptrend and the upper band in a downtrend, switching when price closes through the band it is following.

What are the default Supertrend settings?

An ATR period of 10 and a multiplier of 3 on most platforms. The multiplier has much the larger effect on how often the line flips.

Does Supertrend work for intraday trading?

The calculation is the same on any timeframe, but shorter bars are noisier, so intraday traders often raise the multiplier or pair the line with a trend-strength filter such as ADX. Our scanner and the figures on this page use daily bars only.