Supertrend Indicator

The Supertrend indicator is used on the 4-hour timeframe to determine the overall trend direction. It acts as the primary trend filter in the VRVP Strategy.

Overview

Supertrend is a volatility-based trend-following indicator that uses Average True Range (ATR) to calculate dynamic support and resistance levels. When price closes above the Supertrend line, the trend is bullish; when below, bearish.

How It Works

Calculation

Calculate ATR over the specified period
Upper Band = (High + Low) / 2 + (Multiplier × ATR)
Lower Band = (High + Low) / 2 - (Multiplier × ATR)
Supertrend = Upper Band in downtrend, Lower Band in uptrend

Implementation


# indicators/supertrend.py
 
import pandas as pd
import pandas_ta as ta
 
def calculate_supertrend(
    df: pd.DataFrame,
    length: int = 10,
    multiplier: float = 3.0
) -> pd.DataFrame:
    """
    Calculate Supertrend indicator.
 
    Args:
        df: DataFrame with OHLCV data
        length: ATR period
        multiplier: ATR multiplier for bands
 
    Returns:
        DataFrame with supertrend columns
    """
    # Calculate Supertrend using pandas-ta
    st = ta.supertrend(
        high=df['high'],
        low=df['low'],
        close=df['close'],
        length=length,
        multiplier=multiplier
    )
 
    # Add columns to dataframe
    df['supertrend'] = st[f'SUPERT_{length}_{multiplier}']
    df['supertrend_direction'] = st[f'SUPERTd_{length}_{multiplier}']
 
    return df

Signal Interpretation

Trend Direction	Value	Meaning
Uptrend	1	Price above Supertrend, bullish
Downtrend	-1	Price below Supertrend, bearish

Role in VRVP Strategy

The Supertrend serves as the primary trend filter:

Long trades only when Supertrend is bullish (direction = 1)
Short trades only when Supertrend is bearish (direction = -1)

This ensures trades align with the higher timeframe trend, reducing counter-trend losses.

Configuration


@dataclass
class SupertrendConfig:
    length: int = 10        # ATR period
    multiplier: float = 3.0 # Band multiplier

Parameters

Parameter	Default	Range	Description
`length`	10	5-20	ATR calculation period
`multiplier`	3.0	2.0-4.0	Distance from price for bands

Parameter Effects

Length:

Higher values → Smoother, fewer whipsaws, slower signals
Lower values → More responsive, more whipsaws

Multiplier:

Higher values → Wider bands, fewer signals, more reliable
Lower values → Tighter bands, more signals, more false signals

Usage Example


from indicators.supertrend import calculate_supertrend
from config.settings import SupertrendConfig
 
# Load price data
df = load_ohlcv_data("EUR_USD", "4H")
 
# Configure indicator
config = SupertrendConfig(length=10, multiplier=3.0)
 
# Calculate
df = calculate_supertrend(df, config.length, config.multiplier)
 
# Check current trend
current_trend = df['supertrend_direction'].iloc[-1]
 
if current_trend == 1:
    print("Uptrend - Look for long entries")
elif current_trend == -1:
    print("Downtrend - Look for short entries")

Visual Representation


Price Chart (4H)
│
│    ╭───╮        Supertrend (dotted line)
│   ╱     ╲      ........................
│  ╱       ╲    .                        .
│ ╱         ╲  .    ╭───╮                 .
│╱           ╲.    ╱     ╲                 .
│             .   ╱       ╲                 .
│            . ╲ ╱         ╲                 .
│           .   ╳           ╲               .
│          .   ╱ ╲           ╲             .
│         .   ╱   ╲           ╲           .
│        ....╱.....╲...........╲.........
│
└────────────────────────────────────────────►
         UPTREND    │    DOWNTREND    │
                    │                 │
              Trend Change       Trend Change

Best Practices

Tips for Using Supertrend:

Use on higher timeframes (4H, Daily) for trend direction
Combine with momentum indicators for entry timing
Avoid trading during trend transitions - wait for confirmation
Don’t fight the trend - only trade in Supertrend direction

Stochastic RSI - Momentum timing
Configuration - Parameter settings