The SuperTrend Indicator for Trend & Technical Analysis

A trend direction can be bullish or up, bearish or down, or sideways. Also, longer trends have more power and contain smaller trends. Primary trend lasts about a year or more, secondary trend takes a month to several months, and a minor trend goes for days to weeks. Take a look at this 2025 corn chart illustration:

However, it is easier to say what the trend was rather than to decide what phase it is now or when it is likely to change.

Our friend Allen Gard with Clear Focus Hedging reminded us that the SuperTrend indicator can be of help for making cash marketing decisions as it is quite easy to use. Allen is a commodity futures broker we trust and recommend him to clients when asked for a broker recommendation. He has seen just about everything when it comes to grain marketing and commodity trading.

Most charting services have the SuperTrend indicator ready to be used. We like Barchart and TradingView to work with price charts, both have a free plan that will cover your needs, while they have premium plans for active traders.

To use it on Barchart, open "interactive chart" for a commodity, then click on "Indicators" and search for "supertrend". It's the same in Tradingview.

When added to the chart, it allows you to specify its parameters, "7" for the period and "3" for the factor is a common by-the-book setup.

Charting program will draw red and green lines around the chart. If there is a red line on top of a chart, then the short-term trend is bearish. If there is a green line below the chart, the trend is bullish.

Bearish trend changes to bullish when the line flips from red to green, and vice versa.

This indicator can be useful in trading and for educational purposes.

A trader can enter a trade in the direction of a newly establishing trend when indicator flips. The stop-loss order for the trade can be set by the indicator line and then follows the line.

As any indicator, it has some flaws: its signal may be too late for a short-lived trend and it is not effective in sideways markets. Anyway, it is a great tool and relatively simple to learn and use. Sometimes it catches a strong trend, like in October 2024 on corn. Try it and give it time.

A few words about the parameters. You won’t have to change the period, 7 is fine, but 10 is also widely used. Changing the factor could be more useful though. Smaller factor value will bring indicator lines closer to the price chart. Change those parameters and see how the indicator moves. If the factor is too small the indicator will flip too often creating false signals and you don’t want that. If it is too big the indicator will flip later, missing a portion of a new trend and increasing the price risk. A factor value between 3 and 2.5 should be fine. Eugene uses a factor of 2.5 as on optimum value for corn, beans and wheat markets.

More on this tool and how it works: https://www.investopedia.com/supertrend-indicator-7976167

There are more than 660 technical market analysis systems, some of which have been in use for hundreds of years. The Supertrend Indicator was developed by French trader Olivier Seban in 2009, it is a trend-following overlay that plots directly on price charts, similar to moving averages, but it incorporates volatility for more dynamic signals. It has become a popular technical analysis tool used to identify market trends, potential entry and exit points, and manage risk. We never heard of it until a few years ago and have come to respect it a little more each year.

The “holy grail” of trading is to determine whether a market is in an uptrend, a sideways trend, or a downtrend.  

The Supertrend provides visual cues, color-coded (green for bullish, red for bearish), making it accessible for beginners and experienced traders alike. It can be applied to any supply and demand market from intraday to long-term charts.

How It Works

The Supertrend operates as a dynamic support or resistance level on the chart. It adjusts based on the asset's price action and volatility, helping to filter out market noise and focus on the prevailing trend.

When the price is above the Supertrend line, it signals an uptrend (bullish) and the line turns green. Conversely, when the price is below the line, it indicates a downtrend (bearish) and the line turns red. It is very simple to read the results of the SuperTrend Analysis, unlike many (most?) technical systems.  

Traders often use it for setting stop-loss orders at the Supertrend line and determining position sizes based on the distance between the price and the line.

Common Strategies

• Sell Signal is triggered when the Supertrend line closes above the price and turns red, signaling a downtrend. Enter a short position or exit longs. And vice versa for Buy Signal.

• Breakout Trading: Enter on a price crossover after consolidation (sideways market).

• Trend Following: Ride the trend until the line flips.

• Trend Confirmation: Use in conjunction with other indicators like RSI (for overbought/oversold) or moving averages to avoid false signals.

• Multi-Timeframe Analysis: Confirm signals on higher time frames for stronger conviction.

Advantages

• User-Friendly: Simple visuals and signals make it easy for all traders.

• Volatility-Adaptive: Incorporates dynamic ranges to handle different market conditions.

• Risk Management Tool: Provides dynamic stop-loss levels to limit losses.

• Versatile: Works across assets and time frames, effective in trending markets.

• Noise Reduction: Filters out minor fluctuations for clearer trend views.

Limitations

• Lagging Indicator: It reacts to price changes rather than predicting them, potentially missing early trend shifts.

• False Signals in Sideways Markets: Prone to whipsaws (frequent buy/sell flips) during range-bound or choppy conditions.

• Parameter Sensitivity: Wrong settings can lead to poor performance; requires optimization.

• Not Standalone: Best combined with other tools, as it doesn't identify overbought/oversold levels or reversals independently.

• Market Dependency: Less effective in low-volatility environments where dynamic ranges values are small.

Some traders consider the Supertrend as a valuable addition to their toolkit, but success depends on proper use, backtesting, and integration with broader analysis. If you're applying it to specific charts or strategies, platforms like TradingView or BarChart offer built-in versions for experimentation. We will have more info coming about using The SuperTrend.