This article will show you how to find the best SuperTrend settings using graphical analysis or an automatic system to search for the best solution for you, with some real examples.
Before you get your hands on the indicator settings, you need to know what it means to change those settings and how they affect the SuperTrend.
An indicator could become utterly useless if the settings are changed randomly and without a logical criterion.
Generally, the best thing you can do is to use your technical indicator with the default settings, unless you have a good reason to change them.
Let’s start by saying that the standard-setting of the 10-period SuperTrend with multiplier 3 works well on many instruments in many timeframes.
These SuperTrend settings are good for intraday or multiday, respectively; additionally, you can correctly use the indicator with many different financial instruments.
However, if we want to make TS much more efficient, we can adapt the settings to current market conditions.
Which setting to change?
The indicator has only two input settings, the multiplier with traditional value 3 and the period with standard value 10. The period is not very important; while changing the multiplier, there are essential changes in the indicator’s movements.
So you can only focus on the multiplier and find settings that are more suitable for the instrument and the time frame you are using.
Insider tips: Moving too far from the multiplier standard settings with value 3 means completely altering the function of the SuperTrend indicator.
Using the SuperTrend with multiplier 1 or 6 does not make sense; if the indicator works in the backtest with a value of 6, we can surely abandon the strategy and look for another one.
Then, I advise you to adjust the multiplier setting, but only to perfect it without distorting it, therefore, going to test only the values that approach the standard value of 3.
You can certainly see how it behaves with extreme values , and then I will show you some examples, but it must serve as statistical analysis and not to use these extreme settings.
At this point, I will show you some tips to quickly find the best SuperTrend setting with some real examples.
Multiplier Setting and SuperTrend Signals
When we change the multiplier setting, we will increase or decrease the number of signals as the first result.
As the number of signals decreases, the accuracy of the remaining SuperTrend’s signals increases.
The relationship just described is intuitive enough, but I will help you understand better by comparing two different multipliers on the same chart.
Look at this chart where 2 different STs are drawn with their respective multipliers at 1 – 5.
As you can see, the SuperTrend with multiplier 5 stays very far from prices and changes the indication of the trend very rarely compared to the setting with multiplier 1.
This obviously translates into fewer false signals but also an important reduction in the number of trades.
So, if your Super Trend generates too many false signals, the first thing to do is increase its multiplier.
Period Setting and SuperTrend Signals
Changing the SuperTrend period will have a limited impact compared to the multiplier.
As always I will show you a graph to show you what I am saying.
In this chart, I set two SuperTrends, both with multiplier 3, but with different periods: 10 and 100 periods.
As you can see, the two lines are almost always superimposed, and the two SuperTrends look identical, yet the periods are very different in value.
So in choosing the settings, I would focus exclusively on changing the multiplier.
Backtesting to find the best SuperTrend Settings
The best way to choose the settings of an indicator is to perform a backtest.
With a backtest, we can find the best settings; you only need to create a straightforward trading system that stops & reverses the trading signals.
When analyzing the backtest, you don’t have to take the total profit because the system is obviously not optimized.
The first thing to consider is the number of trades to understand if the number of signals is sufficient for your purpose.
Also, you will need to pay attention to the trade and the percentage of profitability
Let’s try to do a backtest with MetaTrader on UsdCad.
As we saw earlier, the SuperTrend has a multiplier as its fundamental parameter.
I would do a backtest going to analyze the multiplier from 1 to 5 with step 0.5.
As for the period, personally I would leave the default one.
How to choose the Backtest period.
When I run a backtest, the first thing I have to decide is which period to test.
I show you some ideas based on the timeframe you need to use with your SuperTrend, but they are all modifiable choices:
- 15 minutes: go back 1 month
- 60 minutes: go back 3 months
- Daily: go back 3 years
How to find the perfect SuperTrend Settings with MetaTrader using Backtests
First of all, download this free expert advisor from the MetaTrader’s market: Click here
Click on the link “Free Download (MT4) and the and the ST will be automatically installed on your MetaTrader.
I prepared a file with the SuperTrend settings and a simple back-test with stop & reverse to speed up your job.
Remember to download and use these settings because the expert advisor I recommended you to download has activated the trailing stop and other essential functions for this test.
Follow these steps to backtesting:
- Click on “Strategy Tester” or Ctrl + R
- Select the PZ SuperTrend EA
- In “Expert Properties” flag on “Multiplier”
- Insert these values: Start = 2.0 – Step = 0.1 – Stop = 4
- Start the backtest
- Analyze the backtest in “Optimization Results” tab
As you can see, results with a multiplier of less than 3 had a negative result and are not displayed.
As the multiplier increases, the profit factor increases, and the trades decrease.
In our example, the SuperTrend with 3.9 multipliers generated 33% fewer trades with a 50% increase in the profit factor than the standard multiplier setting 3.
We could think of using this setting because we consider the number of trades and the profit factor acceptable.
As you can see, using the SuperTrend with the classic settings, the system was struggling to breakeven.
Remember that we will not use this setting to open and close positions following the backtest strategy.
We have identified a profitable setting to use the SuperTrend on this instrument in this timeframe.
Once the Multiplier is set, we will use the SuperTrend in a complete strategy, knowing that the most critical setting is correct.
You can also decide to use the SuperTrend as a trend filter, knowing that the multiplier setting is better than the standard one.
Discover the perfect SuperTrend Settings by observing the chart
We like to make life easier for traders, so we’ll show you a system to correctly set the SuperTrend only using your eyes.
I will show you a simple way to choose the best SuperTrend settings.
Keep in mind that the principal goal we would like to achieve is limiting false buy and sell signals.
To limit false signals, we need to study the SuperTrend color changes visually. Take note that ST turns either green or turns red when the trend is changing.
For example, to analyze EurUsd, we apply 5 SuperTrend indicators to a stock chart showing historical closing prices.
After we change the five SuperTrends settings, increasing and decreasing the multiplier value.
Graphically we have this output:
Now we’ll search the best-performed SuperTrend settings of the last 3 months in a daily chart.
We can eliminate these settings:
Now we can examine the chart with only 3 ST settings and find another set with many false signals:
The best performer is the ST settings with 3.5 and 4 multiplier inputs.
We can use these settings until the volatility changes.
SuperTrend settings for trend follower trading systems
When you use the SuperTrend in a trend follower strategy, you will want to ride the trend for as long as possible.
The basic rule is that in a trend follower strategy, the more you increase the SuperTrend’s multiplier, the more you will reduce the number of signals.
The lower the SuperTrend’s multiplier the greater the false signals.
In the past few years, the markets have changed. Trend follower strategies failed to work with many financial instruments (for example, with currencies like EURUSD).
In the past few years, the markets have changed. Trend follower strategies like the SuperTrend failed to work with many financial instruments (for example, with currencies like EURUSD).
It is difficult to find financial instruments that perform really well with the SuperTrend used alone, regardless of the setting.
Generally, we prefer to use mean reversion strategy systems that work well in modern financial markets.
Remember that trend follower strategy generally doesn’t do well with mature markets like the Large Capitalization Stocks of the S&P 500.
When there is a large amount of “smart money” and volume, the financial instrument usually exhibits mean-reverting characteristics.
There are many stocks in the Nasdaq or other financial instruments like commodities traded with the SuperTrend indicator.
I showed you how to use the SuperTrend settings and graphical it properly.
I like to use this system because is straightforward and very simple.
We could also use more advanced tools like TradeStation or MultiCharts Backtesting software to find the best performer settings.
Finally, we prefer to use the SuperTrend trading strategy with longer-term time frames (Daily, Weekly, and Monthly).
In this way, we can limit many false signals.
SuperTrend Indicator Formula: Link
What is a SuperTrend indicator in trading, and how is it used?
The ST turns green and the buys signal is generated.
The ST turns red and the sell signal is generated.
What is the Supertrend indicator, and how is it used?
In this tutorial, we are talking about Super Trend indicator: Link
How to use Supertrend indicator for intra-day trading?
You can use the ST for intraday trading with a 15 minute or 60-minute chart. However, we like the higher time frame for our automated trading systems.
Does a Supertrend indicator work?
Yes, it’s a fantastic technical analysis indicator for the trend follower trading system.
Which is the best combination of indicators for swing trading?
SuperTrend and RSI is the best combination of indicator for swing trading, in our view.
Is SuperTrend an indicator best for crude oil trading?
You can easily use the ST for the crude oil trading system when the crude oil trending.
SuperTrend is the best technical indicator to trade in the stock market?
You can use the ST with a stock screener on many trading platforms to check the trend direction.
Also, you can use this indicator for trailing stop loss using the ATR. It’s a fantastic tool for this task.
Who is Olivier Seban?
Olivier Seban is the SuperTrend indicator developer.
He is a French writer author of the bestseller “Tout le monde mérite d ‘être riche”. This is a post about him.
Do you never use a Multi Time Frame SuperTrend Indicator?
Yes, we developed a MultiTimeFrame SuperTrend Indicator to try to minimize any false signal. You can find the tutorial here.
SuperTrend in Traderpedia