Welcome Everyone! In today's lesson, I'll be sharing another powerful strategy with you.
We have already covered a lot of indicators in previous lessons. However, there was one crucial indicator I didn’t focus on in detail — the Super Trend. The main reason for this is that I wanted to dedicate a detailed lesson on this strategy.
Super Trend works perfectly not just on the 5-minute chart, but across multiple time frames. We have already shown how to use Super Trend on the 5-minute chart for intraday trading. But the exciting part is that it doesn’t stop there — Super Trend works amazingly well for swing trading too, helping you catch market bottoms and ride trends with incredible risk-reward ratios.
The best part is that you can capture large moves with small stop losses, enabling you to catch continuous market trends. Today’s lesson will focus on using Super Trend for Swing Trading.
Understanding the Super Trend Setup:
If you’ve missed our earlier lesson on the 5-minute chart strategy with Super Trend, I suggest going back and checking that out for a clearer understanding of the intraday strategy. But today, we’re going beyond that — we’re focusing on the swing trading aspect of Super Trend.
First, let’s look at the Super Trend settings. Many people often ask, “What settings should I use for Super Trend?”
Here’s a quick overview:
These settings are important because the Average True Range (ATR) calculates the range of price movement for the last 10 candles. The factor of 3 multiplies this range to provide the signal. When the price breaks this range, Super Trend generates a buy or sell signal.
You don’t need to do any complicated calculations — everything is handled automatically. Your job is simply to mark it on the charts and use it effectively.
How Does Super Trend Work on the Daily Timeframe for Swing Trading?
Let's dive into the daily time frame for swing trading. While many traders focus on intraday timeframes like the 5-minute chart, Super Trend on the daily chart works wonders for swing trading.
Take a look at this chart of Nifty. As you can see, the red and green lines represent the sell and buy signals. Red means sell, and green means buy.
Let’s understand this step-by-step:
The First Entry:
A buy signal is triggered when the Super Trend changes from red to green. However, we don’t take the entry immediately on the first green candle. We always wait for confirmation. After the green candle, if the next few candles are red, we wait for a green candle that breaks the high of the previous red candle.
This breakout confirms that the trend is likely to continue, and now we can enter.
Trend Continuation:
Once we enter, we ride the trend. As long as the Super Trend is green, we continue following the trend. For example, you might enter the market at a level of 15,003, and by the time the sell signal triggers, the price could reach 17,900 — a 2600-point move in Nifty!
Second Entry on Support:
Another great entry point occurs when the price tests a support level but doesn’t break it. You might see a pullback to the support area, and if the market respects that support and bounces, you can enter again with a very small stop loss.
For example, let’s say you’re looking at a stock that has tested a support level and hasn’t broken it. The Super Trend will give you a buy signal at the support level, and you enter with a small stop loss just below the support. If the price continues in the trend, you can capture large moves — in some cases, over 2000 points in Nifty.
Best Entry Methods:
- Breakout Entry: This method works well if you’re entering after a breakout, where the Super Trend signals a change in trend direction.
- Support Entry: The best method, however, is to enter near the support level. This gives you a small stop loss, reducing the risk while allowing you to capture larger movements.
Risk-Reward and Stop Losses:
When using the Super Trend strategy, your stop loss is very simple:
- If you’re using a breakout entry, your stop loss will be the low of the first breakout candle.
- If you’re entering at support, your stop loss will be just below the support level.
This small stop loss allows you to ride large trends. You might experience a stop loss hit occasionally, but with small stop losses and large target potential, the overall risk-reward ratio is in your favor.
What to Avoid:
- Fake Breakdowns: Sometimes, you might see a red signal (sell signal), but there’s no follow-up candle. In such cases, avoid entering the trade. If the price moves back above the breakout point, you should exit immediately and avoid chasing that trade.
- Market Reversals: If a price breaks below a support level but then reverses quickly, don’t enter the trade. The market is likely going to test the level again, and it might not move in your favor.
Conclusion:
The Super Trend strategy is a powerful tool for both intraday and swing trading. It works across all time frames, but for swing trading, the daily time frame is incredibly effective. By using Super Trend, you can catch significant trends with very small stop losses, giving you a fantastic risk-reward ratio.
Remember:
- Use breakout entries for trend continuation.
- Use support-based entries for the best risk-reward setups.
- Always wait for confirmation before entering a trade.
- Stick to the strategy, and the results will follow.
By mastering the Super Trend strategy, you can significantly improve your trading performance and start capturing large market moves with smaller risks.
Alright, so what happens in this scam? I’m sharing so many examples to help you gain confidence because when things repeat over and over, your mind starts fixing them. You’ll know exactly when to maintain your stop loss, where to make your entries, and how to react when the stop loss gets hit. For example, if you see a green candle closing, that's a clear signal for you to exit. This helps develop discipline in executing entries and exits properly.
Now, take this trade for example: a stock entered at 2:50 PM, and within a short time, the stock went from 500 to 1000, doubling in value! This happened with a stop loss of just 34 points—about 1.5%—and look at the huge rally you got to ride! Super Trend indicators are fantastic for catching these massive trends, no complex strategies are needed. The simpler you keep it, the easier it is to make those entry and exit decisions. Complexity only leads to confusion.
I’ve been showing you how simple entries based on the Super Trend indicator can catch amazing swings, even on resistance and support levels. When price bounces at these levels, your entries have smaller stop losses, and you get to ride a bigger trend. For instance, the stock Crompton showed perfect resistance and then a nice dip. Look at the charts; you’ll see exactly how support and resistance work for catching trades.
The key is to never chase trades in the middle of a move. If you miss an entry, don’t try to get in too late. Instead, wait for the market to pull back to a support level. For example, when a stock like ICICI Bank hits a resistance point, we wait for confirmation before entering. Even if you miss an initial move, patience will reward you with better entries later.
Look at how the Super Trend indicator perfectly identifies the support and resistance points—small stop losses, big trends! And the more examples I show, the more you’ll realize how effective this system is.
For example, look at UPI’s chart. The stock broke down but didn’t provide a confirmation candle, so we didn’t enter. This is the value of the confirmation candle. When you get a breakout and the confirmation is there, that’s when you enter. Similarly, you wait for the price to hit support and make a buy signal before jumping in.
Now, let’s talk about entry methods. The first method is simple: if a breakout occurs and a green candle is formed, you enter when the next candle breaks the high of that green candle. But if a red candle follows and breaks the low of the previous candle, you avoid entering at that moment. You’re looking for confirmation.
Another method is based on Super Trend: if there’s an upside breakout and the price tests support, you buy. If the red candle closes below the support, you exit. Otherwise, you ride the trend.
I’ve shown you a lot of examples today, and I hope you can see how well these methods work. Swing trading with the Super Trend indicator is straightforward. With both breakout strategies and support/resistance-based methods, your risk-to-reward ratio is fantastic, and the entries are crystal clear.
Swing trading with Super Trend works great on daily timeframes, but don't think it’s just limited to that. It works on intraday charts too. You can apply it to 5-minute, 15-minute, 30-minute, or even hourly charts. For instance, if the 5-minute chart shows a sell signal but the 15-minute chart shows a buy signal, you get a target based on the 15-minute support level. When the price breaks the 15-minute support, you can plan your exit.
So, these simple methods, applied across different timeframes, can significantly enhance your trading. You don’t need to complicate things. Stick to the basics, wait for confirmation, and always manage your risk. Keep practicing with this method, and you’ll see better results over time.
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