SuperTrend: A Versatile Stop Loss

SuperTrend M11

The SuperTrend indicator is an enhancement of the Maximum Adverse Excursion (MAE) concept, as introduced by John Sweeney in the mid-nineties. It is most commonly applied as a trailing stop indicator, adjusting to both 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. Watch the video below or continue reading to learn more:

SuperTrend M11 Calculation

The internal mechanics of the SuperTrend indicator are comparable to the Chandelier Stop. However, a long trail stop is not set from the highest high, but a median and average true range period. Both valuesare calculated for the last bar, preventing the trailing stop level from adjusting during the current bar.

SuperTrend M11

Accordingly, the M stands for Median, whereas 11 indicates that the median and volatility offset each are calculated “1 bar ago”. Therefore, the SuperTrend M11 indicator does not recalculate the stop level with each incoming tick, optimizing CPU load. Finally, there are two options for defining a break of the stop line: Intrabar high/low vs. bar close above/below. In order to reduce the number of whipsaws, we chose the latter option as default. Other than applying the SuperTrend as a trailing stop, you may also apply it as a trend filter. One may then display the trend as paint bars, alternatively, expose it via the public property in an automated strategy and/or with another indicator. However, we do not recommend to use the SuperTrend indicator for entry timing as the signals typically come with significant delay.

Supertrend intrabar vs. close

SuperTrend M11 vs. SuperTrend U11

Our Indicator Library has two versions of the SuperTrend, namely M11 and U11. As mentioned, M11 stands for Median whereas U11 is the universal version. It features a wide selection of moving averages and algorithmic options for calculating the trend baseline and volatility offsets. Specifically, there are more than 30 different moving averages for baseline smoothing and 4 options for calculating the volatility offset. 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). Finally, one may determine the trailing distance from the selected moving average by adjusting the offset multiplier. Large multiplier values will produce fewer reversals / trend changes than small multipliers.

The SuperTrend U11 indicator is therefore more versatile and capable of recreating a number of other trailing stop loss indicators, such as the Gann HiLo Activator or the ATR Trailing Stop.

Re-creating the ATR Trailing Stop

One may re-create the ATR Trailing Stop by setting the SuperTrend U11 “Algorithmic Options” as follows:

  • Baseline smooting: SMA
  • Offset Formula: TrueRange
  • Offset smoothing: Wilder

Next, set the Input Parameters to mirror the ATR Trailing Stop default settings:

  • Baseline period: 1
  • Offset period: 10
  • Offset multiplier: 3,5
SuperTrend vs. ATR Trailing Stop

Re-creating the HiLo Activator

In recreating the HiLo Activator, one would first choose the Median as input series for the indicator. The “Algorithmic Options” would then be set as follows:

  • Baseline smooting: SMA
  • Offset Formula: Range
  • Offset smoothing: SMA

Again, the Input Parameters are set to mirror the original HiLo Activator defaults:

  • Baseline period: 50
  • Offset period: 50
  • Offset multiplier: 0,5
Supertrend vs. HiLo Activator

Other than the Gann HiLo Activator and ATR Trailing Stop indicators mentioned above, the following are available from this category: Chande Kroll Stop, Chandelier Stop, Deviation Stop, and the Wilders Volatility Stop.

More information on the SuperTrend 11 indicator for NinjaTrader 8 available from the below link: