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Logic that creates the SuperTrend Indicator


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Logic that creates the SuperTrend Indicator

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  #1 (permalink)
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Does anyone have a logic description of the supertrend indicator? I'd like to try my hand at writing my own copy of it for CQG (or.. if someone knows where this has been done I'm not above using someone else's indicator )

I've not been able to find a description of what the logic is behind the indicator?

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Hi ,
take a look here. https://www.tradesignalonline.com/lexicon/view.aspx?id=Supertrend

In the upper area are two links to the source code.
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BASIC UPPERBAND = (HIGH + LOW) / 2 + Multiplier * ATR
BASIC LOWERBAND = (HIGH + LOW) / 2 - Multiplier * ATR

FINAL UPPERBAND = IF( (Current BASICUPPERBAND < Previous FINAL UPPERBAND) and (Previous Close > Previous FINAL UPPERBAND)) THEN (Current BASIC UPPERBAND) ELSE Previous FINALUPPERBAND)

FINAL LOWERBAND = IF( (Current BASIC LOWERBAND > Previous FINAL LOWERBAND) and (Previous Close < Previous FINAL LOWERBAND)) THEN (Current BASIC LOWERBAND) ELSE Previous FINAL LOWERBAND)

SUPERTREND = IF(Current Close <= Current FINAL UPPERBAND ) THEN Current FINAL UPPERBAND ELSE Current FINAL LOWERBAND

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Jerryflyguy View Post
Does anyone have a logic description of the supertrend indicator? I'd like to try my hand at writing my own copy of it for CQG (or.. if someone knows where this has been done I'm not above using someone else's indicator )

I've not been able to find a description of what the logic is behind the indicator?

A super trend indicator in my mind is a myth, you can use moving averages to a degree and many other indications that you can see by eye, but nothing anyone creates can beat volume, because volume is where its at. Volume moves the marlkets without question, so any indicator is only reflecting what is happening in volume anyway, so why not go to the source of the reasons why indicators show what they show?

Any indicator shows indications because something has made it show and it lags behind what is causing the indications. My advice - Study Volume, Study VSA principles, Study Volatility which is representative of the fast or slow pace of buying and selling exchange. It's a zero sum game, but volatility shows the desire on the bid and ask in the DOM!

Peronally I have dumped all indicators other than true volume, volatility and price action, price action is also showing what volume is telling you. the open, the high, the low and the close are all reference points, so that is why I don't use candles also, I like clear price bars showing gaps too.

Super Volume, Super Volatility - and lack of Volatility and compare the two indications and look back in history to see what is likely in the future!

Volume and Volatility is my Dynamite!

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DynamiteTrader your post is VERY intriguing to me. I've been searching for a volume/volatility indicator that works for me as I to believe that this is a needed component of a trading system. However, that said... I've not found any that really that fit the bill!

I'm curious as to what you've found that works and how you use it?

Thanks!

J

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Jerryflyguy View Post
DynamiteTrader your post is VERY intriguing to me. I've been searching for a volume/volatility indicator that works for me as I to believe that this is a needed component of a trading system. However, that said... I've not found any that really that fit the bill!

I'm curious as to what you've found that works and how you use it?

Thanks!

J

It's all so simple really, first set your chart to colour volume and price bars the same, red for lower close than previous close and green for higher close than previous close! Overlay HVOL on your volume chart. I never trade tops or bottoms of day trends or higher, but wait for impetus - volume to confirm a desire to move in a direction, up or down, volatility should increase with any volume increase with market moves up or down, any decrease generally does not confirm the move and actually belies makret manipultion potential.

Volume increase and lack of volume shows where the interest in market direction lies. Block buying and block selling in larger numbers than usual will help you see where the institutions are trading. This is my Dynamite!

Good luck, let me know which markets you trade! I trade futures only!

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Jerryflyguy View Post
DynamiteTrader your post is VERY intriguing to me. I've been searching for a volume/volatility indicator that works for me as I to believe that this is a needed component of a trading system. However, that said... I've not found any that really that fit the bill!

I'm curious as to what you've found that works and how you use it?

Thanks!

J

Following this thread, I would suggest that volume can be measured and broken down into reconciled amounts of buying and selling volume components by various methods, but then you have to convert those buying and selling volume "amount" measurements into "force" of supply & demand measurements. You can have strong forces at work on low total volume bars and weak forces at work on large total volume bars. What you need is the right indicators to point you in the right direction.

The same right indicators will demonstrate that volatility is a price effect and not a cause of price movements. My thoughts are that volatility is a distraction for a lot of people trying to measurie the wrong thing.

In summary , you need to get down to measuring the forces of supply & demand not the amount of buying volume and selling volume in order to perceive the cause behind price movements.

My analogy is that it is not the size of the armies that went into battle (total Volume) but how fierce the soldiers fought( which is a force measurement irrespective of the total volume).

Regards

cmacdon

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cmacdon View Post
Following this thread, I would suggest that volume can be measured and broken down into reconciled amounts of buying and selling volume components by various methods, but then you have to convert those buying and selling volume "amount" measurements into "force" of supply & demand measurements. You can have strong forces at work on low total volume bars and weak forces at work on large total volume bars. What you need is the right indicators to point you in the right direction.

The same right indicators will demonstrate that volatility is a price effect and not a cause of price movements. My thoughts are that volatility is a distraction for a lot of people trying to measurie the wrong thing.

In summary , you need to get down to measuring the forces of supply & demand not the amount of buying volume and selling volume in order to perceive the cause behind price movements.

My analogy is that it is not the size of the armies that went into battle (total Volume) but how fierce the soldiers fought( which is a force measurement irrespective of the total volume).

Regards

cmacdon

Indeed the volume does not show you the balance between buying and selling, supply or no supply, demand or no demand, but that buying and selling has taken place and thus the quantity of trade exchanges. The volatility shows the rapidity, not of price effect, but the willingness of the traders to get involved in the exchange of contracts, it's the emergency with which the desire to exchange is portrayed creating volatility based on what the crowd of traders percieve and thus create volatility or not! A lack of volatility then, is quite the opposite and shows receding interest, just as receding volume and is therefore very often an indication of an undesired directional movement!

I would add to your analogy with, it's not just how fierce the soldiers fought, but the quality of their weapons! 95% or greater get this wrong, so size is not the issue here!

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There are several volatility based trailing stops that you may use. All of them use the ATR such that there will be a wide stop when volatility is high, but a narrower stop when the market calms down.

Here are some example for a long stop. The short stop would be defined the opposite way.


ATR Trailing Stop: A multiple of the ATR is deducted from the current close.

Chandelier Stop A: A multiple of the ATR is deducted from a Donchian high

Chandelier Stop B: A multiple of the ATR is deducted from the highest high since in position

SuperTrend: A multiple of the ATR is deducted from a moving average


Coding these indicator is fairly simple. The starting point would be the current close, the highest high over a selected lookback period of a moving average. In a second step you simply deduct a multliple of the ATR over a selected lookback period.

Below are screenshots attached showing the different trailing stops.



ATR Trailing Stop:




Chandelier Stop A:




Chandelier Stop B:




SuperTrend (Median):


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Dynamitetrader View Post
It's all so simple really, first set your chart to colour volume and price bars the same, red for lower close than previous close and green for higher close than previous close! Overlay HVOL on your volume chart. I never trade tops or bottoms of day trends or higher, but wait for impetus - volume to confirm a desire to move in a direction, up or down, volatility should increase with any volume increase with market moves up or down, any decrease generally does not confirm the move and actually belies makret manipultion potential.

Volume increase and lack of volume shows where the interest in market direction lies. Block buying and block selling in larger numbers than usual will help you see where the institutions are trading. This is my Dynamite!

Good luck, let me know which markets you trade! I trade futures only!



Thanks for taking the time to add details! So do you trade intraday or use this indicator combination in a daily chart?

Iím a futures guy almost exclusively, crude, cattle and grains.. with dabbles elsewhere

J

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Fat Tails View Post
There are several volatility based trailing stops that you may use. All of them use the ATR such that there will be a wide stop when volatility is high, but a narrower stop when the market calms down.



Here are some example for a long stop. The short stop would be defined the opposite way.





ATR Trailing Stop: A multiple of the ATR is deducted from the current close.



Chandelier Stop A: A multiple of the ATR is deducted from a Donchian high



Chandelier Stop B: A multiple of the ATR is deducted from the highest high since in position



SuperTrend: A multiple of the ATR is deducted from a moving average





Coding these indicator is fairly simple. The starting point would be the current close, the highest high over a selected lookback period of a moving average. In a second step you simply deduct a multliple of the ATR over a selected lookback period.



Below are screenshots attached showing the different trailing stops.







ATR Trailing Stop:









Chandelier Stop A:









Chandelier Stop B:









SuperTrend (Median):






Wow! Thanks for going to the work to send all this. I was familiar with the basic ATR stop, itís interesting to see the various adaptations!

Thanks!

J

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joker542 View Post
BASIC UPPERBAND = (HIGH + LOW) / 2 + Multiplier * ATR

BASIC LOWERBAND = (HIGH + LOW) / 2 - Multiplier * ATR



FINAL UPPERBAND = IF( (Current BASICUPPERBAND < Previous FINAL UPPERBAND) and (Previous Close > Previous FINAL UPPERBAND)) THEN (Current BASIC UPPERBAND) ELSE Previous FINALUPPERBAND)



FINAL LOWERBAND = IF( (Current BASIC LOWERBAND > Previous FINAL LOWERBAND) and (Previous Close < Previous FINAL LOWERBAND)) THEN (Current BASIC LOWERBAND) ELSE Previous FINAL LOWERBAND)



SUPERTREND = IF(Current Close <= Current FINAL UPPERBAND ) THEN Current FINAL UPPERBAND ELSE Current FINAL LOWERBAND



Joker thanks for the long-hand logic here. Itís exactly what I was looking for! I can code it out from this !!

J

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Interesting discussion @Dynamitetrader
@Jerryflyguy

I also trade using VSA and market structure. I look forward to seeing more. Do you guys have a journal?

K

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Jerryflyguy View Post
Thanks for taking the time to add details! So do you trade intraday or use this indicator combination in a daily chart?

Iím a futures guy almost exclusively, crude, cattle and grains.. with dabbles elsewhere

J

Yes, futures currency and grains, nat gas, bonds, metals, oil.

When I get to 10 posts, then I'm allowed to post charts!

DT

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Jerryflyguy View Post
Thanks for taking the time to add details! So do you trade intraday or use this indicator combination in a daily chart?

Iím a futures guy almost exclusively, crude, cattle and grains.. with dabbles elsewhere

J


Dynamite trader,

What is your difference from using Granville's "On balance Volume" indicator which is based on identifying higher or lower closes over time and accumulating volume based thereon?

If you wish to finesse Granville generalised approach, then I suggest, a study Gann's 'Rule ofThree' method or his "How to Balance a Stock method" to identify the basis for his reversal signals for fast moving stocks.

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Dynamitetrader View Post
Indeed the volume does not show you the balance between buying and selling, supply or no supply, demand or no demand, but that buying and selling has taken place and thus the quantity of trade exchanges. The volatility shows the rapidity, not of price effect, but the willingness of the traders to get involved in the exchange of contracts, it's the emergency with which the desire to exchange is portrayed creating volatility based on what the crowd of traders percieve and thus create volatility or not! A lack of volatility then, is quite the opposite and shows receding interest, just as receding volume and is therefore very often an indication of an undesired directional movement!

I would add to your analogy with, it's not just how fierce the soldiers fought, but the quality of their weapons! 95% or greater get this wrong, so size is not the issue here!

I think there is some commonly held illogic in the above reply. If you always think buying and selling is evenly balanced because one buyer is always matched up to one seller then the above logic may work, for you. But if you think higher prices suggest higher demand, and lower prices suggest more supply, then that suggests there are always imbalances shown through the bid/ask prices,and what is the next accepted buying or selling price.
Technical analysis indicators, need to measure and show over a specified time period, a fair allocation basis for determining the buying pressure and the selling pressure, as that shows the force being exerted by the buyers or the sellers from time to time. I believe you can then end up with fair estimates of changes in buyer and seller behaviors based on measurements, not intuitions. I have many new indicators that reflects this paradigm works in practice.

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cmacdon View Post
I think there is some commonly held illogic in the above reply. If you always think buying and selling is evenly balanced because one buyer is always matched up to one seller then the above logic may work, for you. But if you think higher prices suggest higher demand, and lower prices suggest more supply, then that suggests there are always imbalances shown through the bid/ask prices,and what is the next accepted buying or selling price.
Technical analysis indicators, need to measure and show over a specified time period, a fair allocation basis for determining the buying pressure and the selling pressure, as that shows the force being exerted by the buyers or the sellers from time to time. I believe you can then end up with fair estimates of changes in buyer and seller behaviors based on measurements, not intuitions. I have many new indicators that reflects this paradigm works in practice.

You may consider anything you like to be illogical, that is your prerogative, but the evidence is clear that volume and volatility are leading indicators, they are logical, no matter what other indicators have been constructed to show market pressure! The raw volume and voliatility always cut the mis information out of the market. The Elephants footprint shows about 80% of the time and that's enough for me no matter who wishes to deny the evidence. It's in the charts!

The best indication in trading would show the correlation between volume, volatility and price action and I am currently engaged in a programming exercise with an undisclosed organisation who wish to explore my methods, for which I know no other trader who uses what I use! I am simply responding to help others here, not wishing to criticise or be criticised!

If you accept what I say or not, it is of no concern to me!

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cmacdon View Post
I think there is some commonly held illogic in the above reply. If you always think buying and selling is evenly balanced because one buyer is always matched up to one seller then the above logic may work, for you. But if you think higher prices suggest higher demand, and lower prices suggest more supply, then that suggests there are always imbalances shown through the bid/ask prices,and what is the next accepted buying or selling price.
Technical analysis indicators, need to measure and show over a specified time period, a fair allocation basis for determining the buying pressure and the selling pressure, as that shows the force being exerted by the buyers or the sellers from time to time. I believe you can then end up with fair estimates of changes in buyer and seller behaviors based on measurements, not intuitions. I have many new indicators that reflects this paradigm works in practice.

Is there any chance of you providing some details as to the specific indicators you use to support this strategy?

Thanks

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swschultz View Post
Is there any chance of you providing some details as to the specific indicators you use to support this strategy?

Thanks

Swschultz
I could as I have been writing a book setting them all out. It has taken 6-years to write, 50% longer than writing my Ph.D. but when I last mentioned a solution to a previous post by someone else, I was chastised by Futures.IO as attempting to market the book on their website.
cmacdon

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cmacdon View Post
Swschultz
I could as I have been writing a book setting them all out. It has taken 6-years to write, 50% longer than writing my Ph.D. but when I last mentioned a solution to a previous post by someone else, I was chastised by Futures.IO as attempting to market the book on their website.
cmacdon

Ouch. Sorry to hear that. I can understand the concern about self-promotion but at the same time the info provided either directly on FIO or outside the context of the site could be helpful in pointing individuals in the right trading direction.

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kareem40 View Post
Interesting discussion @Dynamitetrader
@Jerryflyguy

I also trade using VSA and market structure. I look forward to seeing more. Do you guys have a journal?

K

kareem can you clarify what you mean by VSA?

J

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Jerryflyguy View Post
kareem can you clarify what you mean by VSA?

J

Volume Spread Analysis.

K

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