Super Trend Indicator : How Does it Work?
The SuperTrend indicator is a technical analysis tool that can be used to identify trends in financial markets. It is based on the average true range (ATR) and the current price of an asset, and it can be used to generate buy and sell signals.
To calculate the SuperTrend indicator, you need to determine the following values:
- ATR: The average true range is a measure of volatility. It is calculated by taking the average of the true range over a specified number of periods.
- Base price: The base price is the most recent closing price of the asset.
- Multplier: The multiplier is a number that is used to adjust the sensitivity of the indicator. A higher multiplier will result in a more sensitive indicator, while a lower multiplier will result in a less sensitive indicator.
Once these values have been determined, the SuperTrend indicator can be calculated using the following formula:
SuperTrend = (Base price x ATR x Multiplier) + Base price
If the current price is above the SuperTrend value, it is considered a buy signal. If the current price is below the SuperTrend value, it is considered a sell signal.
The SuperTrend indicator can be used in conjunction with other technical analysis tools and techniques to provide a more comprehensive analysis of market trends. It is important to note that the SuperTrend indicator should not be used as the sole basis for making investment decisions, and that it is important to conduct thorough research and analysis before making any investment decisions.