Supertrend
An ATR-based overlay that sits on the price chart and flips between bullish and bearish, giving traders a clear visual signal of trend direction.
Definition
Supertrend is a price-overlay indicator built on the Average True Range (ATR) that plots a dynamic line directly on the candlestick chart. When price is above the Supertrend line the band turns green, indicating a bullish trend; when price falls below it, the band turns red, signalling a bearish trend. It was popularised in Indian retail trading communities because its output is unambiguous — there is no "interpretation" required, just a colour and a side. It is commonly combined with ADX to confirm that the trend being signalled actually has momentum behind it.
Why it matters
Supertrend is among the most widely followed indicators on NSE and BSE trading desks, particularly for intraday equity and index futures. Its ATR-based construction means it self-adjusts to the current volatility regime: the trailing stop widens automatically during high-volatility sessions like budget day or expiry week, and tightens during quiet consolidation. This prevents the mechanical over-tightening that plagues fixed-point stop strategies. For F&O traders, a Supertrend flip on NIFTY or BankNIFTY is frequently used as a trigger to either exit short-premium positions or initiate directional futures trades. Its simplicity also makes it easy to automate in algorithmic strategies.
How it works
The indicator first computes the ATR over N periods (default 7). It then constructs upper and lower bands around the midpoint of each candle (typically the average of High and Low): Basic Upper Band = ((High + Low) / 2) + (Multiplier × ATR) and Basic Lower Band = ((High + Low) / 2) − (Multiplier × ATR). The Supertrend value itself is then determined by whether the previous close was above or below the prior Supertrend line — a rule that prevents erratic flipping. The default multiplier is 3. A lower multiplier makes the indicator more sensitive (more signals, more whipsaws); a higher multiplier produces fewer but more reliable signals.
Example
Suppose NIFTY futures are trading at a hypothetical level of 23,500 on a 15-minute chart with a 14-period ATR of 60 points and a multiplier of 3. The lower band would be approximately 23,500 − (3 × 60) = 23,320. As long as price stays above 23,320 and the Supertrend line is green, an intraday trader might hold long positions with a trailing stop just below the Supertrend band. If NIFTY drops and closes a 15-minute candle below 23,320, the Supertrend flips red, prompting an exit or a potential short entry.
Track NIFTY trends live
Monitor live NIFTY and BankNIFTY option chain data to align your Supertrend signals with actual market participation.