HOMEWORK TASK 5
INSTITUTION: STEEMIT CRYPTO ACADEMY
COURSE: All About SuperTrend Indicator
CRYPTO PROFESSOR: STREAM4U
HOMEWORK TASK: Make a Homework Task 5 Post on the below Topics.
(1). What Is A SuperTrend Indicator?
(2). Show how to set SuperTrend on Chart and what are its settings need to configure. (Screenshot Needed)
(3). How SuperTrend Shows Buy-Sell Indications? (Screenshot Needed)
(4). When We can place a Buy Trade with the help of SuperTrend Indicator? (Screenshot Needed)
(5). When we can place exit/square off, sell order with the help of SuperTrend Indicator? (Screenshot Needed)
(6). How false indications look in SuperTrend Indicator? (Screenshot Needed)
(7). According to your view, what Stoploss you will suggest?
When a market is trading within a range of prices, we're usually on the lookout for support and resistance to enable us know when to buy and sell. The narrative changes however, when the market begins to trend. If we consider a bullish market as an example, it is not advisable to enter the market when it has begun to trend or it has begun a run (ie. bull run).
Nevertheless, there's an indicator that guides the investor under trending or running market conditions. This is a very special indicator that is specifically applicable for running or trending markets. This indicator is called SuperTrend indicator.
WHAT IS SUPERTREND INDICATOR?
The SuperTrend indicator is a line on the trading chart that follows the price trend and shows the current trend direction. It can easily be differentiate from the moving average by its different colors, on either sides of the price. Above the price, the color is red, but it changes to green as it goes below the price.
When the color is red, it's indicating a downtrend but when its green, it's indicating an uptrend. The SuperTrend indicator is best suited for a trending or running market.
Unlike moving average lines, you don't see the SuperTrend indicator by default. Personally, I'm unable to bring up the SuperTrend indicator on my Huobi Global mobile app. However, this is possible on the pc web version. There are series of simple procedures one can take to display the SuperTrend indicator. This is discussed in the next section.
SETTING UP SUPERTREND ON HUOBI GLOBAL CHARTS
Like I stated earlier, SuperTrend isn't shown by default on the chart, so if you want to make use of it, you have to set it up. Setting up SuperTrend indicator on Huobi Global - one of the world's leading crypto exchanges, is quite easy, just take the following steps -
- Open Huobi Global and navigate to 'Exchange', under the 'Spot Trading' tab, where you can find the trading chart of different crypto pairs.
Navigating to 'Exchange' on Huobi Global
- Click on 'Exchange' and you'll be directed to the technical charts page. On the left, you can select the particular coin pair you want to study then you might want to make the background brighter and the chart area more bigger. From the image below, you can find where to toggle the background mode and where to expand the chart to fullscreen.
Exchange page of Huobi Global
Note that in my own chart, I personally removed the moving averages as I do not want my chart to be crowded.
- On any convenient area on the chart, right click and select 'insert indicator' from the options that will be displayed.
Inserting the SuperTrend indicator
- From in the search box of the ensuing indicator options that will be displayed, type the word 'supertrend'. In my case, the 'SuperTrend' option appeared after I had only typed 'su'
Searching for SuperTrend indicator
- Select the 'SuperTrend' option and wait for a while for it to load. After it finishes loading, the SuperTrend indicator will appear on your chart like in mine
Loaded SuperTrend indicator on a chart
After displaying the SuperTrend indicator, another action you might want to take is to configure it. This is discussed next.
CONFIGURING SUPERTREND INDICATOR
There are parameters that determine how sensitive the SuperTrend indicator is to price trends. In this post, I'll be sticking with the basic ones, they're the ones you can adjust in Huobi Global. They are -
- The ATR period length
- The SuperTrend multiplying factor
The ATR (Average True Range) is an indicator the measures the volatility of the market prices using price history for a specific period of time. Shorter time periods will produce more buy/sell signals. On Huobi Global, the default time period is 10 days. This period is well suited for measuring recent price volatility, though it can further be reduced to 5.
The SuperTrend multiplying factor is a figure by which ATR is multiplied by to give the super trend indicator. On Huobi Global, the default factor is 3. Changing this factor will increase or decrease the number of trading signals. If it is reduced for instance, the SuperTrend will give lots of buy/sell signals, many of which may be false, and on the chart also, the SuperTrend indicator will also be closer to the price.
This is how to alter these settings on Huobi Global -
- Click on the SuperTrend setting icon which is next to the 'close SuperTrend icon' as shown in the image below.
SuperTrend settings/format icon
- On clicking on the settings icon, a dialogue box is revealed from where you can alter the 'Period' and 'Factor' inputs. This is shown in the image below.
SuperTrend indicator settings
It is advised to use the default settings of 10 periods and a factor of 3 as these are suitable for numerous cases.
SUPERTREND BUY-SELL INDICATIONS
SuperTrend buy and sell indications can easily be identified on the chart. Consider the image below
SuperTrend buy and sell indications
Aside from the green and red candles, you can notice the red and green trend line (red when it's above the price and green when it's below the price) which is our SuperTrend indicator. We can rightly say that this trendline has two sides - a red side and a green side as it is one line.
The red side indicates sell while the green side indicates buy.
Using this trendline, otherwise called SuperTrend indicator, to buy and sell is quite easy especially since you only have to look at it. What to look out for to know when to either buy or sell is discussed in the next two sections.
WHEN TO BUY USING SUPERTREND INDICATORS
There is one simple thing you have to look out for to know the right time if you want to place a buy trade using the SuperTrend indicator. Let's take a closer look at the last image with the image below
When to place a buy trade using SuperTrend indicator
Take note of the circled portions in the image above, where the candlesticks touch the green part of the SuperTrend indicator.
I have earlier stated that the green side of the SuperTrend indicator indicates buy. Now, it's not just anywhere on the green side. To place a buy trade order using the SuperTrend indicator, place the buy trade order where the candlestick touches the green side of the SuperTrend indicator. A good instance is shown in the circled portion of the image above.
WHEN TO SELL USING SUPERTREND INDICATORS
To know the right time if you want to place a sell trade using the SuperTrend indicator, you only have to look out for another simple incidence. Let's take a closer look at the image below
When to place a sell trade using SuperTrend indicator
Take note of the circled portions in the image above, where the candlesticks touch the red part of the SuperTrend indicator.
I have earlier stated that the red side of the SuperTrend indicator indicates sell. Now, it's not just anywhere on the red side. To place a sell trade order using the SuperTrend indicator, place the sell trade order where the candlestick touches the red side of the SuperTrend indicator. A good instance is shown in the circled portion of the image above.
FALSE INDICATION IN SUPERTREND INDICATOR
I'll begin this section by reiterating that you don't just buy or sell anywhere along the green or red part of the SuperTrend indicator respectively. The reason is, sometimes, the SuperTrend indicator can give a false indication. For more explanation, consider the image below.
False indications in SuperTrend indicator
In the 'false buy' circle portion of the image above, you notice that the SuperTrend indicator indicated buy and later indicated sell but the price never got to the SuperTrend line but instead went further away from it, causing the indication to change from buy to sell. This is a false buy indication.
In the 'false sell' circle portion of the image above, you notice that the SuperTrend indicator indicated sell and later indicated buy but the price never got to the SuperTrend line but instead went further away from it, causing the indication to change from sell to buy. This is a false sell indication.
Observe that anybody who sold during the false sell indication period sold too early. This is the primary reason why you need to wait for the candlestick to touch the SuperTrend indicator before placing either a buy or sell order. This safe practice will help you avoid false indications in the SuperTrend indicator.
MY STOPLOSS SUGGESTION
Let's assume you didn't know how to use the SuperTrend indicator and you ignorantly or mistakenly bought during a false buy indication, then the price begins to fall rather than rise, What do you do? When do you sell?
The answer to these questions is - STOPLOSS. Stoploss is a sell order you place to limit your losses in an unfavorable trade.
Now, let me show where to place stoploss using the false buy instance I gave. Let's consider the image again
Stoploss in SuperTrend indicator
In the above image, the buyer buys at the $48,400 mark because the SuperTrend indicator was green at the time. A little while later, the price begins to fall, below $48,400. To prevent severe losses and considering that the price could still rise (as at that time), it will be wise to set a stoploss.
This stoploss should not be too soon as the price can still rise, and it should not be to far away to prevent severe loss. My suggestion will be to set the stoploss at the price of the last support.
In this example, you can see that my suggested stoploss prevented further loss as the price moved below the last support. It's true that the price rose up shortly after, but there was no indication, from the technical chart, for someone to enter the market or continue remaining in the market at that point.
When a market is trading within a range, ideal technical indicators for trading include support and resistance. However, once the market has begun a run, bull or bear, the ideal technical indicator for entering and trading in this market is the SuperTrend indicator.
The SuperTrend indicator is not 100% accurate. It gives false signals sometimes and that is why there has to be a contact between the candle and the SuperTrend indicator before we make a trade decision.
If in any case is caught in the eye of the storm, maybe due to ignorance, nonchalance, mistake, or outright gambling, then a stoploss set at the price level of the recent/previous support will be an ideal way out.
Let this be my contribution for now. Thanks for reading.
ALL images used in this post are screenshots taken by me, from my accounts on either Huobi Global or Trading view. All illustration images are well captioned.