Supertrend is trend following. It is plotted on prices and their placement indicates the current trend. It is very simple yet powerful Indicator which generates Buy and Sell signals. If you are tired of following mutliple indicators and are looking for something simple to follow, then this is the right Indicator for you.
If Supertrend Indicator is combined with Price action then it make a superb trading strategy for Trading any timeframe in any style of Trading.
Supertrend works on ATR which Average True Range, which is the amount of Volatility i.e movement up or down any security can have in any particular given timeframe.
There are several key things you need to keep into account which using Supertrend indicator.
1) Super trend should be used on correct time intervals i.e for Intraday trading it should not be used below 10 min timeframe as it will generate multiple false trading signals.
2) In Technical analysis nothing is Perfect, and so the Supertrend is also not. It will false signals in sideways market and works well in Trending market.
3) Proper Trailing Stoploss should be maintained to minimize losses and maxmize profits.
Buy Signal is generated when Supertrend turns Positive i.e below the price and in Green line.
Sell Signal is generated when Supertrend turns Negative i.e above the price and in Red line.
In the below video I have explained Supertrend Indicator for Intraday trading, which walks with the trend and can be used for capturing the entire trend.