Analyzing trends in markets is sometimes not easy because there are so many aspects that can create trends such as data of the economy, events in the political situation nationally and internationally, and the feelings of the investors. Failure to have a clear understanding can pose a great danger especially when making an investment as one is bound to make wrong decisions leading to lots of losses.
To address this, there are some tools and platforms that market analysis can help in the identification of the trends in the market. TradingView, Bloomberg, StockTwits and all these are important in providing data and few more brokerage firms and trading software’s have own built-in-trend analytical tools.
Thus, to speak about identification of market trends, it is necessary to apply a set of methods. Moving averages, Relative Strength Index (RSI), and MACD are the technical analysis tools used for price and momentum analysis with the effectiveness of revealing a trend’s direction and its strength. Based on this concept, fundamental analysis includes monitoring economic performance factors and company earnings’ releases to capture the pattern of the market’s movement.
In sentiment analysis, investors mood is detected from the financial news and social media which helps in identifying trend reversals or continuations. Ensuring that one reads and follows credible market news every now and then acts as a background to observed trends. Thus, the use of multiple sources of information and analysis provides a broad outlook on the market.
Thus, by using all three methods namely, technical, fundamental and sentimental analysis, one can get a better view of the market trends. This makes them flexible in the provision of investment solutions and makes them able to meet the intricacies of the financial market necessary for their investors.
Super Trend is known to be a bare bone indicator with a pin-point like accuracy to predict the trend of market. This tool is fairly independent, though its efficiency can be boosted further by using it in conjunction with other measures. In this article, we will discuss this Super Trend indicator in detail, and also reveal several sophisticated approaches of uses.
What Is Super Trend Indicator?
If you don’t know much about Super Trend indicator, then you should know that, it is a very useful indicator when it comes to identifying trends on the market. It can indicate the direction of the market and its relative activity level with the help of the Average True Range (ATR). Such dual function makes the Super Trend indicator suitable for use by traders due to its strength.
This indicator can be incorporated into a chart via the Indicators tab on TradingView to get a make use of of it. Once added, the indicator provides straightforward signals: One prescribes buying when the figure is high, commonly represented by the green light signal, and selling when it is low and represented by the red light signal.
Limitations of the Super Trend Indicator
Despite its efficiency in terms of trend following the Super Trend indicator is not very effective in sideways market with low momentum. On balance, this can mean several consecutive losses for the trader. Hence the use of this indicator by the Organisation might not give the best results as indicated above. This kind of false signals need to be eliminated and the solution is in including other approaches in the process.
Advanced Strategy 1: Triple Super Trend Indicator Setup
One of the most powerful of all is carrying out a strategy where three Super Trend indicators with various settings are used. Here’s how to set it up.
How To implement Advance Strategy 1
When you are through with your chart, plot three Super Trend indicators on the chart. Adjust the following settings:
- First indicator: Hypothesis-testing business: ATR period 12, ATR multiplier 3.
- Second indicator: ATR period 10, ATR multiplier 1.
- Third indicator: ATR period 11 and ATR multiplier is two
For each indicator which is in the style tab, it is necessary to turn off both the long and short icons.
This setup means that you only get into a trade when the three lines are of the same color, this gives you a true direction in the signal. This helps in trading by avoiding the markets that are likely to trade sideways for a long time.
Advanced Strategy 2: Combining with the 200-Day Moving Average
Another potent approach alerts the user when a shorter term resists being denominated by the Super Trend indicator and the 200 days moving average (EMA). This combination works in conjunction where the Super Trend is built on analyzing the short term trends when compared to the long-term trends that are identified through the EMA.
How To implement Advance Strategy 2
Include the Super Trend indicator and place its settings at the default one. Include on the chart a 200-day exponential moving average. A valid trade to go long is when Super Trend is bullish (above the zero line in green color) while the price is situated above the 200-day EMA.
Go short with a capital size equal to the value of the ATR when the Super Trend line is red and the price is below the 200-day exponential moving average. This setup makes you to be on the right side of both the short term and long term trends.
Advanced Strategy 3: Utilizing the Ichimoku Indicator
For a more elaborate formulation of the whole strategy, accompany the Super Trend indicator with the Ichimoku indicator. This method employs the Kumo Cloud to validate trade entries, while denoting the fact that you only trade a market with clear trends.
How To implement Advance Strategy 3
Type in the Ichimoku indicator and right click on it: Properties > Display only > Kumo Cloud. Long trade should always be made when the Super Trend line is green as well as when the price is located above the Kumo Cloud. Trade down the following short entry signal where the Super Trend line is red and the Kumo Cloud is beneath the current price level. The exit trade also takes place for either a 1. 5 profit ratio or when the price enters the Bee Cloud.
