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Most Profitable Supertrend Strategy for Daytrading (Full Supertrend Indicator Tutorial) - YouTube
Channel: Trading Journal
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Hello traders! Supertrend indicator is one
of the most used indicators by new traders.
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Because it is easy to read and it fixes a
major concern of new traders, which is entries.
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Supertrend indicator is a really popular indicator
because it gives entry signals, and people
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believe it is profitable. But I can guarantee
you that, if you follow this indicator by
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itself, you are most likely to lose money
in the long run. Don鈥檛 worry if I sounded
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too pessimistic. In today鈥檚 video, I will
show you 2 really simple strategies, that
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you can use the super trend indicator, and
still be profitable. It is the trading journal
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channel, and please don鈥檛 forget to like
and subscribe for more trading videos.
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If you are new to trading, supertrend indicator
can be really helpful to you. Because it both
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shows you the direction of the trend, and
when you should open a trade. Since it is
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really simple to use, it is one of the best
indicators for new traders. Supertrend indicator
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is a trend following indicator as you can
understand from its name. But it also uses
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the ATR, which is the Average True Range.
And, since it uses the ATR, it generates entries
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based on the volatility, in addition to momentum.
Before revealing 2 highly profitable strategies
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that you can use with the supertrend indicator,
I want to show you the basic trading strategy
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of this indicator. Actually, it is extremely
simple, but if you are totally new to trading,
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you must understand this strategy first.聽
First of all, We will open our charting software
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and add the super trend indicator on the screen.
I use聽tradingview.com, but you can use any
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other platform that you are comfortable with.
I will go to the top bar, and open the indicators
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icon here. And I will search for the super
trend indicator.
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Now, you can see the indicator on your chart.
As you see, there are 2 zones on the chart:
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the green zone, and the red one. If the zone
is green, it means an uptrend. And it means
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a downtrend, if the zone is red. And you can
see the entry signals too. Actually, it is
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really simple logic. You go long when the
zone turns green, and you go short, when the
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zone is red. You can see that the entry points
are written on the indicator. Your stop-loss
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points will be the lines. There is not much
to explain on this strategy, since it is so
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easy to read.
This was the classic strategy to use with
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the supertrend indicator. But, as I told you,
it won鈥檛 be profitable by itself. So, we
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will modify this strategy and create 2 profitable
strategies that you can trade with confidence.
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The main problem with the super trend indicator
is, it gives lots of entry signals. It is
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really profitable in trending markets, but
if the market moves sideways, it doesn鈥檛
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work at all. And as a trader, you must know
that, the market isn鈥檛 trending every second.
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So, you should have a b-plan for the times,
when the market is in a range.
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So we have to find a way to filter out these
range markets. If you follow my channel, and
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have watched my all videos, you might guess
a way to do it. Since we use it quite often
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with many indicators.
The easiest way to filter the trending markets
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is to use moving averages. I know it sounds
too simple, but if you watched my old videos,
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we use it quite often to filter markets. So,
I will add the E.M.A., which is the exponential
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moving average, to our chart. The exponential
moving average is just like the simple moving
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average, but it gives more weight to the recent
data. We will click the settings tab here
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and change the length to 200.
So our first strategy is super trend indicator,
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combined with the 200-period E.M.A..聽
It is a super simple strategy also, but it
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has a way higher winning rate comparing to
the supertrend indicator alone by itself.
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The reason for that is really simple, 200-period
moving average determines the long-term trend,
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while the supertrend indicator determines
the short-term trend. So we will only open
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a position, if the short-term trend is in
the same direction as the long-term trend.
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We will use the super trend indicator with
its regular settings in this strategy. We
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will go long only if the buy signal comes
above the 200 E.M.A., and we will only look
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to go short if the price is below the E.M.A..
That means, we will only take buy signals,
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when price is above the moving average, and
skip the sell signals. And we will do the
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opposite, if the price is below the average.
That way, we will try to skip the false signals
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that the supertrend indicator gives regularly.
Because we will be trading in the same direction
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as the trend.
Let me give you an example. You can see that,
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the indicator gives a sell signal here, but
should we open a short position here?聽
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The answer is no. Because the price is still
above the moving average. We should wait until
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the price moves below the 200 E.M.A., and
we will open a sell position at the first
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candle that opens below the moving average.
At first, I will put my stop-loss at the supertrend
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line, and we will move our stop-loss while
following the trend. That way, you can ride
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a trend risk-free. We will close our position
when the price touches our stop-loss, or when
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the supertrend indicator changes color.
The color of the supertrend indicator changes
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here, and there is a buy signal as well. But
we should not take the trade here. Because
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the price is still below the moving average.
So, we will wait until the price is above
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the E.M.A. and when we see a candle that opens
above the E.M.A. line, we will open a long
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position.
Even if this strategy is so simple, it has
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a way higher winning rate comparing with the
trading supertrend indicator alone. I think
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it is enough for this strategy, since it is
so simple, there is not much to explain. Let鈥檚
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move to our next strategy.聽
Our second strategy is a little more complicated
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than that. But it is more profitable according
to my experience. This time, we are going
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to do something weird, and we are going to
add 3 supertrend indicators on our chart,
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and get rid of the exponential moving average.
I know the chart looks like a mess right now,
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but don鈥檛 worry. We will take care of that
in a second. We will make some adjustments
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before starting to trade. We have to adjust
the setting before trading, otherwise, it
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would be meaningless to add 3 supertrend indicators.聽
First, I will make some style changes, so
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our chart will be cleaner. I will close the
buy and sell signals, and also the buy and
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sell highlights. We will apply this change
to all of the indicators. We will also change
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the inputs of indicators. For the first indicator,
I will change the period to 12 and the multiplier
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to 3. I will repeat this change with different
numbers for the other two indicators as well.
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For the second indicator, the period will
be 11, and the multiplier will be 2. And,
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for the last one, they will be 10, and 1 respectively.聽
Don鈥檛 worry if you are lost, I will explain
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the strategy in examples. The main goal of
this strategy is really simple. We will only
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open positions when all of the lines turn
the same color. First, let鈥檚 look at a short
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setup.
Here you can see that one of the supertrend
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lines changes into red, but it is not enough
for us to open a trade. As I told you, we
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will wait until all of the lines turn into
the same color. Here, all of the lines are
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turning into the same color, so we will open
a position there. The supertrend line in the
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middle, will be our stop loss point. You have
multiple choices to exit this trade. You can
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aim for two times higher than your stop-loss,
as a take profit target. Or, you can move
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your stop loss and take profit points, and
exit the strategy, when one or two lines change
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color. Depending on your risk tolerance. Personally,
I move my stop loss and take profit targets,
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since I enjoy riding the trend risk-free.
And I exit as soon as my stop loss is hit,
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or two lines change color.
Now let鈥檚 move on to a long setup. The same
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rules apply in long positions also. Here you
can see that one of the lines changes color,
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and then the next one. But we will not open
this position since the next candle doesn鈥檛
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turn green. We will wait until all of the
lines turn green, which is here. We will open
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a position at the candle that all of the lines
turn green. Just like the short setup, the
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middle line will be our stop loss point. And
we can set our take profit level at two times
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higher than our stop-loss. Or we can ride
the trend risk free, while moving our stop-loss
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at each candle opened.
I hope with the examples, you have a better
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understanding of how to trade the supertrend
indicator.聽
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Please don鈥檛 forget to backtest these strategies
before trading them. You should never trust
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a strategy before testing it yourself. You
should never trust a strategy, you see online,
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just because a trading mentor tells you it
is good to go. And you can improve your strategies
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while testing them. Because sooner or later
you will start to see some patterns.
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I hope that I could explain the strategy well,
and you understood it perfectly, but if you
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have any questions, feel free to shoot them
up in the comments. Please leave a thumbs
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up if you find this video useful. And please
feel free to share your trading results with
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me.
I hope that I could explain the strategy well,
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and you understood it perfectly, but if you
have any questions, feel free to shoot them
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up in the comments. Please leave a thumbs
up if you find this video useful. And please
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feel free to share your trading results with
me. Have a fantastic and profitable day!
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