supertrend strategy Archives

Does the RSI Supertrend Trading strategy even work? What will happen if you combine RSI indicator with the Supertrend Indicator? Will you make money in trading? To find out, I took 100 Trades with the RSI with Supertrend trading strategy, so you don’t have to. We tested the RSI and Supertrend strategies separately on the Trading Rush channel and they both had a profitable win rate. RSI strategy got a win rate around 49 percent with a 1.5 to 1 Reward Risk Ratio, and the Supertrend indicator on its own got an average win rate. To see the Supertrend trading strategy, check out the Supertrend strategy video on this channel.

When we tested the RSI indicator last time, we entered the trade when the RSI crossed below or above the 30 and 70 levels. When RSI value went above the 30 level, we bought. And when the RSI value went below the 70 level, we sold. On the other hand, with the supertrend indicator, we bought when the supertrend indicator indicated an uptrend, and sold when the supertrend indicator indicated a down trend.

This worked fine! Both trading strategies got a profitable win rate, and made money in the Trading Rush App. But if we want to combine RSI and Supertrend together to see what happens, we will have to modify the strategy a little bit.

You see, the supertrend indicator is showing the short term trend direction. And the RSI indicator is showing the oversold and overbought areas. But as some of you already know, RSI works good when the market is in a range. You can use it to trade the trend. But when the market is moving sideways, some traders sell and buy when the RSI value reaches overbought and oversold zones respectively.

But many times, when the price is moving in one direction, let’s say in an uptrend, the RSI will go above overbought 70 level, and many traders will see this as an increase in buying pressure. Similar thing applies when RSI value goes below the 30 level. Instead of buying, many traders will see the RSI crossing below the 30 level as an increase in selling pressure, and will sell instead of buying.

When we combine the RSI and Supertrend indicator, we buy, when the RSI crosses above the 70 level, only if the supertrend indicator is showing an uptrend. And we will sell when the RSI crosses below the 30 level, if the supertrend indicator is showing a down trend.

Subscribers of the Trading Rush channel probably noticed, that we are not using the 200 period moving average this time. Wouldn’t that affect the win rate, and the end result while comparing it with previously tested strategies? Well yes, but this time, we wanted to see what happens if we don’t use a moving average to find the trend, and use the supertrend indicator instead.

Since we are using the supertrend, in a long RSI and Supertrend setup, we can set the stop loss below it. And in a short setup, you can set the stop loss above the supertrend indicator.

Look at this example. The supertrend indicator is showing a short term uptrend, so we will only look for long entry signals. We wait for the RSI value to cross above the 70 level. When there is a buy signal, we enter the trade and set the stop loss below the supertrend indicator.

On this chart, the supertrend indicator is showing a downtrend, so we will only take short entry signals. We wait for the RSI to cross below the 30 level this time, and when that happens, we will take a short position and we will set the stop loss above the supertrend indicator. Simple as that.

So I tested the RSI with the supertrend indicator 100 times, and here’s what happened.

Number 1. As you can see the profit graph with the RSI and Supertrend strategy, shot up. The profit in the Trading Rush App went from 0 to around 2000 in just 20 trades. At the beginning it gave a lot of winning trades in a row. But then the profit line stopped going up, and started to go sideways. Between zero and 20th trade, it was like a rocket ship, but from 21st to around 60 trades, it was in a range. Then, the profit went almost straight down.

But Why is the Supertrend with RSI giving such a result? Well, while testing, I noticed that sometimes, RSI gives multiple signals in a short period of time. At the beginning, when the price was trending up, RSI with supertrend gave a lot of signals in a row, and almost all of them were won. That’s why you see a big upward move on the profit graph. When the trend was slow, or was changing directions frequently, some trades were won, some trades were lost. Then the price was going in the sideways direction. And after that, when price started trending strongly in one direction, multiple signals were taken in a short time period and won. But that’s not the only thing I found out.

Number 2. We used the Supertrend indicator to find the short term trend direction. But while testing 100 times, I found out that almost all buy RSI signals appeared when the Supertrend was showing an uptrend. And almost all sell signals appeared when supertrend was showing a down trend. In other words, when RSI crosses above the 70 level, the supertrend will most likely show an uptrend. And when RSI crosses below the 30 level, supertrend will most likely show a down trend. With this RSI and Supertrend strategy, supertrend was more of a stop loss indicator rather than a trend direction indicator.

After 100 trades, the RSI Supertrend trading strategy got an approximate win rate of 45 percent. The reward risk ratio was 1.5 to 1, and it got 8 winning trades in a row, but lost 12 trades in a row. So let’s give the RSI Supertrend strategy a TR score.

It gets a 5 out of ten in the Win Rate Category.

And gets a 6.5 out of 10 in the Easy to Use Category. All you have to do is look at the RSI value and set the stop loss below or above the supertrend line.

Even though the win rate was profitable in the Trading Rush App, there were a lot of signals taken in a short period of time. In reality, when you enter a trade, you are not going to take another trade, just a few candles after that. So in the Reliability category, it gets a 4 out of 10.

And even though the RSI Supertrend strategy made money in the end, the profit line went almost straight up at the start, went sideways for a while, and then went almost straight down. That is not as consistent as some other strategies we have seen on this channel. So in the consistent profits category, it gets a 4.5 out of 10.

When you combine the RSI and Supertrend indicator, the entry signals are generated in the direction of the trend. But while testing, I noticed that the supertrend trading strategy we tested 100 times, gave better quality signals on its own. So in the quality of the trades category, it gets a 6.3 out of 10 which is a bit less than the supertrend got on its own.

So the TR score is 26.3 out of 50. And the RSI Supertrend Trading Strategy ranks 15th from the top, just above the Stochastic indicator, and below the Bollinger Bands Trading Strategy.

So that’s all.

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Tag: supertrend strategy

Well, I tested supertrend indicator 100 times, and the results I found were pretty interesting. In this video, you will learn about the supertrend trading strategy, it’s real win rate, and some disadvantages I found after testing it 100 times. But first of all, if you haven’t watched my ATR indicator video, maybe considered watching it before this video, since Supertrend indicator relies on the ATR values to calculate its values. And maybe checkout other videos where i tested other trading indicators 100 times to find their real winrates. You can watch them on the official Trading Rush Website.

If you are new to trading, and have never heard of this indicator before, here’s how the popular Super Trend Indicator looks like. Now, on some trading platforms, super trend indicator can look a little bit different. But the basic indicator will look something like this.

A simple line that changes its color now and then. These colors are usually red and green.

The supertrend indicator is very similar to a moving average. and just like a moving average plotted on a chart, supertrend indicator will also give crossovers time to time.

When the Supertrend line is below the price, the color of the indicator will turn green. Similarly, When the Supertrend indicator is above the price, the color of the indicator will turn red.

But what do these changing colors mean? Well, as the name of the indicator suggests, the Supertrend indicator is trying to show the current Price Trend. It is trying to show the direction of the trend. When the supertrend indicator is green in color, and is below the price, the price is considered to be in an uptrend.

Similarly, if the supertrend indicator is above the price, and is red in color, there is a downtrend going on.

Now to keep it simple, that’s all supertrend really is. An indicator to find the direction of the trend. But people have figured out a way to use it as an entry signal generator. That’s right. The simple supertrend entry strategy goes something like this.

You buy, when the supertrend indicator flips below the price, and the color of the indicator changes to green. Set your stoploss, at or below the supertrend indicator.

And you sell, when the supertrend indicator flips above the price, and the color of the supertrend changes to red. Set the stoploss, at or above the supertrend line.

Now once you have entered the trade, how can you exit using the same indicator? Well, if you are not the trader that uses a fixed stop loss and profit target, you can use the supertrend line to trail your stop loss.

When the supertrend indicator turns green and flips below the price, you can enter the long trade, and trail the stoploss just below the supertrend line. The line will eventually flip over the price, and then you can completely close your long position.

If you have entered a short position when the supertrend flipped to red color, you can trail your stop loss using the supertrend line.

Now if you have been trading for a while, you know we can’t take every trade at every entry signal given by the supertrend indicator. Using the indicator just to find the trend direction is fine, but using it as a entry signal generator on its own can be bad idea.

If you take every entry signal given by the supertrend, you will end up taking short positions in a strong long term uptrend, and long positions in a strong long term down trend.

So to filter out the false signals given by the supertrend indicator, we will use the 200 period exponential moving average.

200 period moving average is widely used to find the direction of the long term trend. If the price is above it, there is an uptrend going on, and if the price is below it, there is a downtrend going on.

So here’s how the modified supertrend indicator trading strategy goes. And I have also tested the supertrend indicator 100 times in the same way, and the results were pretty impressive.

In the long setup, only buy when the supertrend line turns green and goes below the candles, and the price is still above the 200 period moving average. Set your stop loss, at or below the supertrend line.

In the short setup, only sell when the supertrend indicator turns red and flips above the candles, and the price is still below the 200 period moving average. In this short set up, you can set your stoploss at or above the supertrend line.

So using the Trading Rush App to track my trades, I tested the supertrend strategy 100 times on the Euro JPY pair. But I quickly ran out of market data and had to switch to the Euro USD pair.

When I tested other indicator strategies 100 times, I used a fixed stop loss and profit target. So to keep things similar, I have used a fixed profit target and stoploss as well.

In the Trading Rush App, you can see the winrate and the profit graph changing as I take more trades. If you haven’t already, you can download the Trading Rush App from the Play Store, or using the link in the description. You can use it to keep track of your trades while backtesting your trading strategy.

While the backtesting clip is running, here are some important things and disadvantages I found about the Supertrend indicator.

Number 1. Supertrend Indicator, only shows the current direction of the trend. It cannot predict the trend direction. This is why it is better to use the 200 period moving average with the supertrend indicator if you are using it as an entry signal generator.

Number 2. You cannot blindly take every trades given by the supertrend. If you do, you will end up taking trades in the opposite direction of the long term trend as price gives many pullbacks in a long term trend.

Number 3. While testing this strategy 100 times, I found that I was losing trades, and was not getting a good risk to reward ratio, because the stoploss i was setting using the supertrend line was sometimes too far from the entry. Since price does not move infinitely in the same direction, most of the time, my stoploss was hit as price reversed before hitting the profit targets. So maybe consider setting your own stoploss using simple price action levels, when the Supertrend stoploss is way too big.

So after testing the supertrend indicator 100 times, I found that the win rate of the supertrend strategy is approximately 46 percent. Since I used the 1.5 to 1 reward risk ratio with other trading strategies in my previous backtesting videos, I have used the same 1.5 to 1 ratio with this strategy as well. And because of that, even with a win rate of 46 percent, I was able to make a profit. During this backtest, I was able to win 7 trades in a row. but also lost 7 in a row. Even though the supertrend didn’t produce a very good winrate like some other indicator strategies I have tested before, the Supertrend Trading Strategy is still a profitable strategy.

That’s all. Now you know more about the super trend indicator. Like the video if you liked it. Subscribe for more videos. Check out the Trading Rush App and Trading Rush Website for more back testing videos. Thanks for watching, and thanks to all the patrons who make these videos possible by supporting the channel on Patreon. You are Awesome.