Supertrend Indicator for MT4

Introduction to the Supertrend Indicator

There are some indicators that have gained popularity simply because it works. The classic Supertrend Indicator is one of the few indicators that is noted to be an effective trend following technical indicator. This version of the Supertrend Indicator, however has some major tweaks which makes it more attuned to the short-term trend rather than the general mid-term trend direction.

What is the Supertrend Indicator?

The Supertrend Indicator is a popular trend following technical indicator which is based on price movements and momentum reversals in relation to the Average True Range (ATR). However, this version of the Supertrend Indicator uses CCI as a basis for identifying trend directions.

This version of the Supertrend Indicator plots green line below price action to indicate a bullish trend direction, and a red line above price action to indicate a bearish trend direction.

How the Supertrend Indicator Works?

This version of the Supertrend Indicator is quite different from the classic Supertrend Indicators. Instead of looking at how price moves against a prior trend direction measured by a multiple of the ATR as a basis for trend direction, this indicator uses the CCI as a basis for identifying trend direction.

This indicator somehow looks at momentum reversals based on an underlying CCI or Commodity Channel Index Indicator as a basis for identifying trend reversals, then plots the Supertrend line according to its reading of the trend or momentum direction.

How to use the Supertrend Indicator for MT4

This indicator has several variables which allows users to tweak the indicator’s sensitivity within the indicator’s settings. However, most of it are just variations which allow traders to adjust the indicator’s sensitivity on different timeframes.

The “Automatic Timeframe setting” allows the indicator to automatically adjust its sensitivity of the trend direction across all timeframes, and the “Trend CCI Period” is the variable which controls the sensitivity of the indicator across all timeframes. All the other variables are the same as the “Trend CCI Period” variable, only that these are more specific to a timeframe.

This version of the Supertrend Indicator is more of a momentum or short-term trend reversal signal indicator. It is best used as a momentum reversal signal in confluence with the mid- or long-term trend.

Buy Trade Setup

When to Enter?

Identify a market that is in an uptrend. Wait for price action to pullback and cause the Supertrend line to temporarily change to red. Open a buy order as soon as the Supertrend line changes back to green. Set the stop loss on the support below the entry candle.

When to Exit?

Close the trade as soon as the Supertrend line changes to red.

Sell Trade Setup

When to Enter?

Identify a market that is in a downtrend. Wait for price action to pullback and cause the Supertrend line to temporarily change to green. Open a sell order as soon as the Supertrend line changes back to red. Set the stop loss on the resistance above the entry candle.

When to Exit?

Close the trade as soon as the Supertrend line changes to green.

Conclusion

This version of the Supertrend Indicator diverges from the usual method of plotting a Supertrend line. As a result, it produces reversal signals that are more geared towards the short-term trend and momentum. It is however effective if it is used in the context of a long-term trending market.

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