This article shows you how to calculate the SuperTrend Indicator. Watch the video to see me demonstrate the calculations.
The article also explains why the indicator works, how to identify the best markets to use and gives you a link to a SuperTrend trading strategy.
Video – How to Calculate the SuperTrend Indicator in Excel
Watch the video to see me demonstrating how to calculate the SuperTrend Indicator. The formulas used in the video are shown at the bottom of this article: Formulas.
Read the Transcript
What is the SuperTrend Indicator?
‘Super’ + ‘Trend’
The SuperTrend follows the dominant trend until the price closes below (for long trends) or above (for short trends) the indicator.
What Else Does It Do?
The SuperTrend is calculated using the ATR (Average True Range). This means that it adjusts to recent market volatility.
The indicator only moves in the direction of the trend and it only changes direction on the close (which is why you can sometimes see price spikes through the indicator)
What Markets Should I Trade the SuperTrend On?
The SuperTrend indicator works better on markets that tend to trend. You will get better results by focusing on these markets. You can find them by focusing on:
- Markets that have trended in the past – these have a much higher tendency to trend in the future.
- Markets that have a strong identity among traders and investors.
Markets That Have Trended In The Past
There are many ways to identify these markets.
The simplest approach is to visually scan through charts showing a long time-frame. You are looking for markets that have tended to trend smoothly over the years and have not been too volatile or spent too long stuck in ranges.
To process more data you can use an online screener to look for markets that meet the criteria. You want to find markets that have moved up and down regularly without experiencing large amounts of volatility.
Markets That Have a Strong Identity with Traders and Investors
To use the example of the tech-heavy Nasdaq 100. This has shown an amazing tendency to trend over the years. This is because investors and traders understand that buying this index (or the underlying stocks) is a clear bet on ‘risk-off’ technology stocks.
By comparison, the FTSE 100 index of largest UK listed comapnies contains a disparate bunch. It has a heavy weighting of banks, oil producers and miners. It is unusual for all the elements to be performing well (or badly) at the same time and it tends to trend more slowly and have frequent retracements.
These days it is easy to select ETFs with a coherent identity with the expectation that they will trend in the future.
Excel Formulas Used to Calculate the SuperTrend
The SuperTrend indicator is calculated by using the ATR to offset the indicator from the average price. When the price touches the SuperTrend line it turns over to the other direction.
The formulas here can be copied directly into Excel.
Upper Band Basic O24 =((D24+E24)/2)+($O$3N24) Lower Band Basic P24=((D24+E24)/2)-($P$3N24)
Upper Band Q24 =IF(OR(O24<Q23,F23>Q23),O24,Q23)
Lower Band R24 =IF(OR(P24>R23,F23<R23),P24,R23)
SuperTrend S24 =IF(AND(S23=Q23,F24<=Q24),Q24,IF(AND(S23=Q23,F24>=Q24),R24,IF(AND(S23=R23,F24>=R24),R24,IF(AND(S23=R23,F24<=R24),Q24,””))))
Get Extraordinary Trading Results
The power to backtest strategies will transform your trading:
- You can test new trading ideas as they occur to you.
- You can choose only the best and most profitable strategies.
- You can trade with confidence, knowing that your strategy has performed well.
The analysis on this page was carried out using a Tradinformed Backtest Model. The models are created in Excel and allow you to test different markets, try different indicators and entry conditions. To see the latest models check out the Tradinformed Shop.