The SuperTrend U11 is a trailing stop indicator which is built from a baseline and a volatility offset from that baseline. The baseline can be selected from over 30 different moving averages. For the volatility offfset there are 4 different algorithms that can be used. A post discussing different approaches for using the SuperTrend indicator was discussed in our Indicator Spotlight Newsletter (with video).
Indicator Description
The SuperTrend U11 is a stop and reverse (SAR) indicator that trails price action. The trailing stop adjusts to both trading prices and volatility. When volatility is high, the trailing stop is further away from prices. Conversely, when volatility is low, the trailing stop will move closer to prices. One may compare the internal mechanics of the SuperTrend indicator to the Chandelier Stop. However, one does not calculate the long trail stop distance from the highest high, but from a selected moving average. Also there are more options to calculate the volatility offset.
A versatile trailing stop
The SuperTrend indicator is one of the most versatile trailing stops available. “U11” stands for “Universal” and indicates that the moving average is calculated “1 bar ago” and that the volatility offset is also calculated “1 bar ago”. Both values are calculated for the last bar, as the trail stop level should not adjust for the current bar. Furthermore, the SuperTrend indicator does not recalculate the stop value with every incoming tick, optimizing the CPU load. Finally, one may use the SuperTrendU11 to emulate numerous other trailing stop loss indicators, such as the Gann HiLo Activator or the ATR Trailing Stop.
When defining the volatility offset, 4 different formulas are available. The default setting applies the average true range (ATR) from the selected moving average. Alternatively, one may select the average range (AR), the residual mean absolute deviation (RMAD) or the residual root mean square deviation (RRMSD). You may select the trailing distance from the selected moving average by multiplying the offset. For large multipliers there will be fewer reversals than for small multipliers.
Breaking the stop line
The SuperTrend will change direction upon a stopline breach. You have two different options for defining the breach: Intra-bar break, when price first trades beyond it. Alternatively, you may define the stopline breach can as a bar close beyond the stop line. The SuperTrend indicator allows for both settings. To avoid whipsaws, the latter option is set as default.
Other than as a trailing stop, one may use the SuperTrend indicator as a trend filter. You may display the trend as paint bars, or expose it via the public property in an automated strategy and/or with another indicator. However, you should not use the SuperTrend U11 for entries, unless the market is known to be in a clear trend. This is because the SuperTrend indicator entry signals typically come with a delay.
Other Library Indicators
Other than the SuperTrend indicator (U11) the following indicators are available from the trailing stop loss category: ATR Trailing Stop, Chande Kroll Stop, Chandelier Stop, Deviation Stop, HiLo Activator, SuperTrend M11 and the Wilders Volatility Stop.
The SuperTrend indicator (U11) is available for NinjaTrader 8 and our Indicator Spotlight newsletter discussed the ATR Trailing Stop, the Chande Kroll and the Wilder Volatility Stop.
