The Supertrend is one of the most popular indicators among Indian retail traders. It plots a line above or below price that changes colour when a trend reversal is detected โ green for uptrend, red for downtrend. It is simple to read and provides a built-in stop loss level.
Supertrend Calculation (Default: Period=10, Multiplier=3)
Basic Upper Band = (High + Low) รท 2 + (Multiplier ร ATR)
Basic Lower Band = (High + Low) รท 2 โ (Multiplier ร ATR)
Signal: Price closes below Supertrend line โ Bearish (red)
Signal: Price closes above Supertrend line โ Bullish (green)
How to Read Supertrend
- Green line below price โ Uptrend โ hold long positions
- Red line above price โ Downtrend โ hold short or stay out
- Line changes colour โ Trend reversal signal โ potential entry/exit
Supertrend Strategy
Basic Supertrend Strategy (Daily):
Entry: Price closes above Supertrend line (green flip)
Exit: Price closes below Supertrend line (red flip)
Stop Loss: The Supertrend line itself
Best for: NIFTY 50, BANK NIFTY, large-cap trending stocks
Entry: Price closes above Supertrend line (green flip)
Exit: Price closes below Supertrend line (red flip)
Stop Loss: The Supertrend line itself
Best for: NIFTY 50, BANK NIFTY, large-cap trending stocks
Supertrend Settings Comparison
| Period | Multiplier | Sensitivity | Use Case |
|---|---|---|---|
| 7 | 3 | High | Intraday (15min), swing |
| 10 | 3 | Medium | Swing (default โ most popular) |
| 14 | 3 | Low | Positional, fewer whipsaws |
| 10 | 2 | Very high | Aggressive intraday |
On NSE stocks, the Supertrend (10, 3) on the daily chart is a solid starting point. Backtest it on the specific stock you trade โ some stocks respond better to different settings.
Combining Supertrend with RSI
A powerful combination: Use Supertrend for direction and RSI to time entries within the trend.
Enhanced Strategy:
Condition 1: Supertrend is green (bullish trend)
Condition 2: RSI pulls back to 40โ50 (momentum dip within uptrend)
Entry: When RSI crosses back above 50 while Supertrend is green
Exit: Supertrend flips red OR RSI exceeds 75
Result: Filters out weak signals, gives better entry prices
Condition 1: Supertrend is green (bullish trend)
Condition 2: RSI pulls back to 40โ50 (momentum dip within uptrend)
Entry: When RSI crosses back above 50 while Supertrend is green
Exit: Supertrend flips red OR RSI exceeds 75
Result: Filters out weak signals, gives better entry prices
Supertrend for F&O
Supertrend works well on NIFTY and BANK NIFTY options:
- Buy Call options when Supertrend flips green on 15-minute chart
- Buy Put options when Supertrend flips red on 15-minute chart
- Use Supertrend line as stop loss for the options position
Limitations
- Generates whipsaws in sideways markets โ multiple false reversals
- ATR-based stop loss can be too wide in high-volatility conditions
- Lagging โ the signal occurs after the trend reversal has begun
